Hi there Mr. Stitch,
>What do you currently see as a bottom?
That is precisely the problem I'm having here. I just can't see a bottom in the independent head business. IBM and the Asians (TDK, Yamaha, etc.) have muscled in bigtime and ahead on technology curve. Unit growth in heads looks like it will slow given the current torrid pace of arial density growth. With WDC getting cozy with IBM, particularly in the high volume desktop segment, it looks like just leftovers there for RDRT. With Seagate it is a case of leftovers from Seagate's own internal headmaking capacity. That leaves them looking at Maxtor, Samsung, and so on as prime customers facing very stiff competition from IBM, TDK, Yamaha, etc. The rest of calender 98 sure looks like a tough one in terms of revenue for RDRT.
I don't think the DD industry has ever really lost its health. Demand keeps chugging along and will. The internal disruption is the onslaught of MR technology coupled with the development of a capacity/inventory bubble. None of this is new....not even last summer's refrain about how the current experienced players have all become "mature" and beyond suicidal "price wars". And pigs fly too!
Looking at 2 years it seems to me from an independent head business perspective you have to look towards
1. Some killer application that drives storage demand growth to the point that sheer head capacity becomes dear once more.
2. Leapfrog IBM, TDK, etc. on technology.
There are a couple of other remote possibilities. Its hard to tell whether IBM, TDK, Yamaha, Seagate, and others are actually making money on their head business. Could be that they are bleeding red stuff as badly as RDRT/APM and we just don't see it. That could make them pull in their horns at some point, opening up some share for RDRT. Another one is Seagate. It doesn't look like Seagate's heads are technology leaders these days and they will remain under pressure in their favorite high-end market. If they opt to address that by being less vertical and looking outside for heads, they probably won't look to IBM. That could be a significant RDRT opportunity....but its a lot of ifs.
One or more of KMAG, RDRT, and APM could well disappear over the next two years. I expect WDC, QNTM, Maxtor, IBM, etc. to still be around in one form or another.
Sure a cut throat industry isn't it? :o)
Best Regards....Tom
|
