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Technology Stocks : Disk Drive Sector Discussion Forum

WDC 168.94

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3:59 PM EST

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To: Z Analyzer who wrote (5380)	1/30/1999 4:42:00 PM
From: TEMFASSBAL	Read Replies (2) of 9256

<<It appears IBM has shown no interest in competing with HTCH (Simply, IBM is not in the business of making suspensions. SEG tried recently and threw in the towel.) This business is EXTREMELY unattractive to anyone else and, increasingly, to those already in it). Its easy to forget that HTCH designs much of their own proprietary manufacturing and measurement equipment, holds numerous patents and has twenty years experience, creating huge barriers to entry. They have shown they will go to any lenghts to maintain the domination that they have held for longer than most technology companies have existed. Z>> Z I've said this a thousand times if I said it once..the barriers to entry in the suspension business is the single best reason to own this company. IBM (or SEG or whoever) will not integrate into manf. suspensions. As you've noted SEG tried and learned real quickly that it wasn't a good idea. There is no way either could justify the cap ex to manf their respective in house demand and either would have an extremely tough time selling outside their company. Other drive manf are not going to feed their competitors (if theres a reliable second source) OR are they going to allow those competitors to have the early looks at their product that are necessary to manf suspensions for a specific program. Thus you just can't make the #'s work. Its one of those components that in its present state is best sourced from a competant manf, someone who can sell the extremely high volumes necessary to offset the high fixed cost associated with manf suspension assemblies. So it comes down to who is best suited to provide the needed capacity for a majority of the industry. Do they choose HTCH as an independant suspension manf who has shown for many years that they can produce or do they choose a Fujitsu who may be in direct competition with them and hasn't proven they could meet any large capacity (and with them you know who's first in line for product so what happens if they have a problem, which customers would go on allocation first? (BTW I've heard the same thing you've printed RE CAPS but my source is also HTCH). Another thing I think these companies look at when they make these suspension/interconnect decisions is what impact that decision will have on the industry as a whole...i.e. what happens if HTCH isn't successful, what would happen if they went away, who would provide/fill that capacity..the last thing they want to come up against is a severe component shortage that would impact their ability to produce and ship product. On top of all this you have the advantages you mentioned TSA has with the smaller and smaller form factors and the ad ons etc..Thus I agree with you that HTCH is probably now in a better situation than they've ever been in (I love those INVX folks who kept howling about how HTCH was "burning cash"...what a joke...maybe someday that company (INVX) will get a little progressive rather than reactionary and spend some money to make some money..looks like they might be headed in that direction with that new R&D hire for their CP division from CRAY) Anyway I'll bet HTCH keeps their share pretty much intact and I wouldn't be surprised if they boost it a little (I'm obviously in the SEG will come over when the capacity is there camp)...FWIW Tim PS How'd that EBAY trade work out...or is it still working?

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