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Technology Stocks : Seagate Technology

STX 325.99

-0.1%

Jan 20 4:00 PM EST

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To: William Epstein who wrote (5319)	7/29/1998 1:57:00 PM
From: Kevin Linder	Read Replies (1) of 7841

I am not sure that current management will have so much do determine the short term future of SEG as will the trends in the overall computer industry; over supply of the disk drive industry; and the outright cut throat nature of this particular cycle. I had high hopes earlier this year when WDC ran into financial problems and Maxtor announced an IPO. I thought this was a perfect opportunity for the whole industry to return to pricing sanity and return to profitability. My worst fear is that this far into the pricing wars is that the only way to settle this would be for one or two of the industry leaders to turn on production full blast and blow out the people who have been trying to steal market share. The obvious ones would be either SEG or IBM. The $1.8 billion in cash of SEG would protect them through two or three quarters of such action. IBM of course has extremely good staying power and efficient operations. QNTM I am not familiar enough to comment on weather they could withstand such behavior and WDC does not have the cash, staying power, or technology (IMO). SEG has been cleaning house in management for some time. Yields and production efficiencies have increased considerably over the past year. Head count seems to be the optimal size. Seagate Software is helping them stay in the game. I have talked on the phone with Luzco. He seems intelligent and competent. I think he can run the company very well. He was Shugarts hand picked succesor and I don't think that Shugart has stopped thinking any less of him as a business person (Even though I doubt they get along personally now). The classical end of a disk drive war is when some of the participants are so broke and damaged they cannot continue the war. The Koreans (with Maxtor) and the Japanese (through Fujitsu) have shown no interest in changing the course of their economies. I doubt that the managements of these companies are thinking any different. I have this very real fear that the only way to end this war is for one of the big guys to conduct a scorched earth policy. Drop the prices dramatically; use leverage with OEMs; and force the market to return to sanity. No management of any of the companies are probably ready for that. It is a good sign though that SEG has the cash horde, and other efficiencies that they could use to finish this cycle of the disk drive war. Sorry for the pessimism, just seems like one of those days. Kevin Linder

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