Seagate Technology - Fundamentals Message Board

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Technology Stocks : Seagate Technology - Fundamentals

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To: Robert Douglas who wrote (260)	12/2/1998 11:15:00 PM
From: Frodo Baxter	Read Replies (2) of 1989

No need to get your tights in a bunch trying to figure it out. It's pretty basic. Copper, oil, autos, etc. are relatively stable commodity industries, so the dynamics are pretty obvious to all involved. I think I've used the term iterative prisoner's dilemma as a rough approximation. The drive industry is the same, but the stakes are higher. Tech has a secular growth rate of say, 15%. Moore's law dictates 60% yearly improvements. That means productive capacity (GBs per annum) increases at 84% per year. And you wonder why there are boom/bust cycles? What makes this cycle different is that there's too much optimism involved, so no shakeout occured. I wouldn't necessarily argue about credit inflation generally, but the money spent recently to refloat the financially weak players is undoubtedly malinvestment in this specific sector. The refusal to allow these firms to fail will prolong the agony of the industry. Maybe when WDC and HMTT start trading at book...

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