Seagate Technology - Fundamentals Message Board

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Technology Stocks : Seagate Technology - Fundamentals

STX 344.23

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Jan 21 3:59 PM EST

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To: tom pope who wrote (355)	12/13/1998 7:47:00 PM
From: Gus	Read Replies (1) of 1989

I don't see what you see, Tom. Using INTC and MSFT as ultimte examples, people are willing to pay higher multiples to buy a software company than a hardware company. It's probably due to the high margin nature of the software biz where margins can reach up to 90% once a company gets past the cash-burn developmental stage and gets a product that sells well, upgrade after upgrade after upgrade. I only sold most of my VRTS (and ADIC too) because I wanted to increase my exposure to mainframe-centric storage (EMC and CMNT sofar)which I think has the best earnings visibility next year. 1999 is supposed to be the year of Fibre Channel, but there are reports of interoperability issues among the different hardware and software components that are emerging that may introduce some cloudiness in the visibility for the players in the UNIX and NT spaces. Big Iron and the storage systems sold with it have long, complicated sales cycles that involve a rigorous bidding process and a complex TCO (total cost of ownership) analysis that altogether provide high quality visibility. The riskiest part of the shorting equation for a storage software stock like VRTS may be the possibility that theme: "Storage is at the center of E-commerce" may gain more and more momentum and create the kind of hype that lifts all boats, some more than others. Having said all that, I respect instinct, the law of supply and demand, and Moore's law in that order so I hope you go with the flow on VRTS, Tom. Regards, Gus

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