Irrational exuberance may, IMO, also mean a lofty devaluation of a security. This definition clearly relates to the markets treatment of ReadRite this week.
Folks, there is a reality here that has not been talked about by industry guru Stich or anybody else. The company reported operating results in mid-April. Following the results and subsequent conference call, the stock began to appreciate with the group. At that point in time, all industry analysts, portfolio managers, and individual investors were aware of the WDC contribution, AS WELL AS the lack of contribution (ie IBM). Nobody cared. So, IBM issued a press release in an unrelated event that seems to have spooked investors. Completely irrational.
WDC, IMO, has merely signed a second source supplier and may, at some future point in time, use IBM as a primary supplier. BUT, RDRT is trading as if WDC is gone. This is unlikely. It seems obvious that WDC has moved to secure parts in an attempt to gain share on SEG and QNTM without the POSSIBILITY of an interuption. ie. RDRT erred on the 2.8 platform. The company has admitted this and has corrected the problem. Importantly, the company has also stated that the 2.8 program could be the shortest lived to date, and is NOW FOCUSED on the 3.2-3.4 platforms. IN FACT, RDRT was the first to deliver prototypes to Maxtor who is ahead on the technology curve.
Furthermore, in order to guard against future mishaps, the company on April 13 hired Mark Re, a very senior engineer from IBM, to lead its R&D efforts. Why would Mark have joined a dog? Be real folks!!
RDRT, IMO, is a slam dunk buy. The fundamental problems which hurt this co's credibility are behind. What if RDRT qualified Maxtor, Seagate, and WDC on the 2.8 platter before June 30. And, what if they qualified Maxtor on the 3.4 program soon as well. Believe me, the stock would rocket higher. And this could be more likely than the stock continuing to trade at a bankruptcy valuation, or worse, a multiple below that which the stock traded during a cyclical downturn in the industry. The fundamentals are improving here and WDC, although a large customer, will likely not be 100% lost and the possibility and likelihood of RDRT offsetting any declines with others like SEG and Maxtor are very likely too, IMO. Good luck and think before acting and listening to the bears!! the STUD |
