More News from the WSJ. This comes as no surprise. But it does underscore the fact that things have got to be gloomy at ADPT from an earnings standpoint. In addition, I view the recent departure of CFO Paul Hansen as a negative. CFO's do not move around much from company to company, and as a general rule, the departure of a CFO is usually a red flag that something is not right. Perhaps Hansen's departure is related to the many pending class action lawsuits. But you can bet your sweet you-know-what that there is something behind his departure that as of yet has not been disclosed to the public. As they say in the WalMart ad, "Watch for falling prices..."
July 10, 1998
Disk-Drive Industry's Slump
Continued in Second Quarter
By CHRISTOPHER GRIMES
Dow Jones Newswires
The disk-drive industry's slump continued in the second quarter, made worse
by weakened demand for personal-computer components.
The big U.S. players -- Seagate Technology Inc., Quantum Corp. and
Western Digital Corp. -- are all expected to post large earnings declines from
their year-ago levels. Western Digital already has warned investors to prepare
for a wider loss than had been expected.
These companies are fighting increased competition from the likes of
International Business Machines Corp., Maxtor Corp., Fujitsu Ltd. and
Samsung Group.
Making the already tough landscape even worse was a brutal inventory
correction in the PC industry, which started early in the first quarter and
continued into the second. Compaq Computer Corp., the world's leading PC
maker, idled its U.S. plant for two weeks in April to level out its inventories.
IBM and Hewlett-Packard Co. also cut back on PC production, analysts said.
"Clearly, we saw the continuing impact of the inventory correction, when we
had three of the big four computer makers either reducing their build plans or
their channel inventories," said Bear Stearns & Co. analyst Andrew Neff.
Seagate May Post Profit
For the glass-is-half-full crowd, Seagate looks poised to reverse two straight
quarters of losses.
Todd Bakar, an analyst at Hambrecht & Quist Inc., estimates that Seagate
earned 10 cents a share in its fiscal-fourth quarter ended June. The Scotts
Valley, Calif., company earned 61 cents a diluted share, excluding charges,
in the year-ago quarter.
Mr. Bakar said Seagate's cost-cutting measures, which included 15,000
layoffs, have helped its performance. The company also seems to have
improved its high-end drive business, a market where its dominance has
eroded in the last year.
"I think they will turn a profit, albeit a small one," Mr. Bakar said. "The vector
is moving in the right direction."
Joel Pitt, an analyst at Deutsche Morgan Grenfell, said Quantum may have
lost money in the competitive desktop-PC drive business. But the Milpitas,
Calif., company probably saw "moderate improvement" in its tape business.
Quantum "didn't do too badly, [considering] nobody's doing very well," Mr. Pitt
said.
Mr. Pitt estimates that Quantum earned a penny a share in its fiscal first
quarter, compared with 61 cents a diluted share in the like period a year ago.
Western Digital Warning
Western Digital warned June 9 that it would likely post a loss above $100
million before adding on the additional costs of a licensing agreement with
IBM.
Mr. Neff is expecting Western Digital to record a loss of about $1.30 a share
for the fiscal fourth quarter. The Irvine, Calif., earned 95 cents a share in the
year-ago period.
Analysts continue to be cautious about recommending shares of the
disk-drive companies.
Mr. Bakar said he expects a "slow gradual recovery, not the sharp recovery
we've seen" from the industry in the past.
"Clearly, you've got six strong players competing in the business in the
desktop [computer] space," Mr. Bakar said. "Increasingly, people need to
look at who's capable of achieving high volumes, low costs with great
customer service. Not all six major players will be able to do that."
Source: WSJ Online 7-10-98 interactive.wsj.com
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