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Technology Stocks : Disk Drive Sector Discussion Forum

WDC 166.30

-4.7%

3:59 PM EST

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To: Frodo Baxter who wrote (3522)	6/7/1998 12:53:00 AM
From: Tom Simpson	Read Replies (3) of 9256

From Maxtor website.. MILPITAS, Calif. - June 5, 1998 - Maxtor Corp. announced that today it filed a registration statement with the Securities and Exchange Commission relating to a proposed initial public offering of $500 million of common stock, of which $100 million of common stock will be sold by the selling stockholder, Hyundai Electronics America. The offering will be lead managed by Salomon Smith Barney, and co-managed by Hambrecht & Quist, Lehman Brothers, Merrill Lynch & Co. and NationsBanc Montgomery Securities LLC. Sure leaves a lot the imagination. Trouble is, can't seem to get a fix on how many common shares will be out there after its over. On the latest S-1 it seems as though HEA is going to exchange all of its preferred shares for 44 million common shares leaving up to 60+ million shares for JQ public. Following the money, we have 400 million into Maxtor for x shares and 100 million into HEA for y shares (and y must come out of those 44 million since only 15 thousand shares are outstanding now). Maxtor pays off 250 million in various debt and adds 150 million to working capital. Book value goes from -219 million to +180 million or thereabouts. So what then would it be worth? If we model it relative to WDC then on a Price to Book basis we see a 5 year range running from 1.1 to 4.3 presently sitting at 2.8. That would give Maxtor a market cap somewhere in the 400-500 million range. On a price to sales basis WDC has a range from .12-.65, presently sitting at .34, in the middle. Maxtor had 1.4 billion in sales last year and once more that yields a market cap in the 400-500 million range. Looks to me like this is a deal to have the public buy around two thirds of the company for the value of the whole company. I must be missing something here. Good thing we have all those fine brokerages involved to explain it to me. You mentioned treatment which might be afforded convertibles earlier. I would think they would be just thrilled to see fresh junior money coming in to fill up that 219 million dollar hole. Conversion has to be the last thing on their mind. Anyone see another way to get at valuation here? Should Maxtor trade at a relative premium or a relative discount to WDC and why? Best Regards......Tom

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