Z,
<<can you tell us what factors lead you to be so negative on WDC? Two years ago they could do no wrong>>
Well, one thing we know now is that what they did was all wrong. The combined efforts of RDRT, WDC, and AMC to extend thin-film inductive without properly nurturing MR has likely killed at least one of them. Of the three, RDRT seems to be the best candidate for rehab. WDC basically had to go to IBM for a bail out (technically) which would have been more had they agreed on a price (my conjecture). Most who know me know that I am a critic of WDC's model. I still believe fully that the real leverage in the DD sector lies in heads and media technology and note that SEG's recent report reflects they continue to supply a goodly share of these critical components although they are relaxing a bit on this strategy. WDC seems suspended somewhere between the QNTM and SEG strategy and somehow, in doing so, lack definition.
I am still troubled about the 77m write off for returned product from their last report. Has that problem grown? I don't know. It was so ill defined in their report there is really know way of knowing short of insider data. But it looms in my mind when contemplating the upcoming report. Further I reiterate that WDC's deal with IBM is exclusively in the desktop (read low margin, hardest fought over) arena. What of the enterprise division? Oh, thats the one they have publicly acknowledged is a candidate for relocation from the current plant in Singapore to Kuala Lumpur. I don't think they would do that if it was going gangbusters. I also don't know anyone who believes WDC is doing well in that segment. So what does that leave them? Well, there is the sub zero segment. SEG has just announced they are the only supplier in the market today with a specifically designed product for it. And we have to assume that Conner's new venture is going to stir that pot soon. And then there is the 2.5 inch mobile segment. IBM and NEC dominate it with over 78% combined share and Fujitsu has launched a major attack with SEG mumbling in the background about it. So back to the desktop, where WDC is left in the most bitterly contested segment, wholly reliant on IBM for a key technology.
How about the miserable performance of their media division which has always been contrary to their stated strategy of "virtual integration" (so why continue to suffer a poor division in the first place and what is their strategy really?).
I won't even touch on the financials. One last thing. Ask yourself whose fortunes have Maxtor's and Samsung's gains diminished?
Anyone want to tell me what the positives are?
Best,
Stitch
But the compelling reasons for me have been anecdotal which I am loathe to publishable here. |
