Seagate Technology - Fundamentals Message Board

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Technology Stocks : Seagate Technology - Fundamentals

STX 278.47

+0.9%

Nov 6 3:59 PM EST

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To: Stitch who wrote (113)	11/11/1998 2:12:00 PM
From: manohar kanuri	Read Replies (2) of 1989

Go away for a couple of days and you have a new thread and a zillion posts! Many posts ago Gus noted: One datapoint that is relevant: commodity producers tend to sell below variable costs when the glut is severe and protracted. Fighting to live another day or living to fight another day? WRT commodity industries the manner in which that plays out is critical. I don't see any clear signs yet which tell me that SEG is playing the game on its own terms. It has the financial strength to do so but it remains to be seen if it has the strategy as well. They have not articulated it yet. For now I am out of SEG (and will keep my contribution to the thread at a minimum) because at 30 I think it is overvalued for a commodity producer. The VRTS stake is a red-herring - if I want VRTS I will buy VRTS directly and not use it to rationalize holding SEG. I'm discounting the Dragon stake for now - briefly, I think it has slipped to third place in the overall speech/voice league despite having the top spot in the dictation retail market. If I see the low-end/low-margin DD segment account for a lower percentage of SEG revenue that would be my first cue to think about jumping back in. And I would get really bullish if it constitutes a declining percentage of its revenue over the next few quarters. Either by keeping its share of the low-end market constant or even increasing it without decreasing margins. I would not jump back in if it simply drifts down to what looks like an "attractive" level. BTW, taking revenue up from 1.5 to above 2 is not a big deal. Trend growth and one or two bankruptcies should do the trick. IOM's numbers going forward should prove instructive in this regard. I find IBM to be a useful comparison and benchmark - it is in many cyclical and commodity markets but its revenues are cyclical only in terms of the overall market. "Focus" can be of many kinds. Smoothing out revenue could/should be one of them as well, unless the zig-zagging is along a steep upward slope in which case all sins are forgiven. mano

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