AD,
Couldn't help but check the thread after all of the recent publicity.
In your zeal to focus on unit volume, did you perchance consider margin on sales? The fact of the matter is that prices in the PC market are continuing to plummet at an amazing rate. One month ago, a new low-end unit retailed for $600. Today, white-box makers and overseas companies are selling store-brand boxes for $399. It is becoming increasingly difficuly to justify upgrades that cost as much as the price of a new computer, particularly given the continuing reduction in CPU product life-cycles.
As for Diamond's quarterly results, there's no silver lining in this thunderhead. DIMD has once again demonstrated an inability to adequately manage inventories. The press release explaining away 3Q performance is eerily reminiscent of previous press releases a few years back, when the company was worth 3x to 4x its present value. There really can be no question now that Bill Schroeder and Dave Watkins have run this company into the ground. Feels like the board of directors is into masochism. The board has had ample time to act to stem the damage caused by this terrible twosome, yet the misery continues. Seems like the financial motivation for management changes would be overwhelming to any rational person.
Diamond's exposure on the RIAA lawsuit is fairly significant, particularly if the RIAA is able to secure an injunction to prevent the shipment of the MP3 decoder device. In addition to legal costs related to defending against a lawsuit that could have been avoided, Diamond may very well have to write-off the development expenses that went into this ill-conceived product in the event that RIAA prevails.
Tactical miscues aside, one should also strongly question management's decision to further entrench itself in shrinking markets and commodity products. This is a company that desperately needs to diversify away from low-margin commodity products with short shelf lives.
Overall, the long term prognosis remains poor, and it is getting worse by the quarter.
Jonathan
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