Z,
<<Why would you expect Quantum to surely reach an all time high when revenues have shrunk, both company and industry profitability have gone to hell and are very unlikely to return to former levels as
a result of the disk drive industry having become more competitive...>>
Well, the industry will be as competitive and profitable as its major players want it to be. If there are companies out there like Fujitsu and Maxtor who want in, who aim for a couple of years at a specific entry point, and then when the time is ripe, go for it both on execution and price, then there will be problems. But if the leaders basically want to be in the sector in order to make money, and they watch their inventory, and aggressively stay with or (obviously better) ahead of others on the density curve, then there will be decent money to be made. Not great money, not software margin type money, but decent money. Even in drives.
"...and DLT growth has slowed from an astounding rate of well over 100 percent to maybe fifteen percent..."
Well, they are saying now 25% growth, though they may be counting ATL in that mix, I'm not sure. No one expected the 100% growth to continue, and, in hindsight, obviously some of the 100% growth was double ordering while supply was tight. In the last CC, they were projecting better than 40% growth for ATL. That appears to be their current strategy--hold their own on drives, grow the other parts of the business.
One may well ask why bother with drives. Well, they are still (for the moment) number one in desktop units. They apparently still have positive cash flow. And the business, while as you have said elsewhere why crow about being marginally profitable in what historically has been the best quarter for drive companies, appears at least to be getting better, with ASPs relatively stable and inventories down at all of the major vendors. Plus there are potentially major new applications for drives that will be coming on line in the next year or two. These applications could produce some big winners among those drive companies that properly take advantage of them.
<<To top it all off, management has showed poor judgement in both the heads and high end business over a period of years and the successful launch and transition to super DLT now loom as a major risk.>>
The first part of this sentence can't be disputed. One hopes that their new high end products will be successful, the jury is still out, we'll have to see. At least they got out of the heads business, won't bleed there any longer.
The transition to SDLT is obviously a risk, and if it doesn't go well, there will be a bad quarter or two in FY00. However, SEG already said that LTO won't be ready for a ramp for quite awhile. EXBT still has to prove themselves, and surely face an even greater uphill battle than QNTM. Their stock price reflects widespread skepticism that they will get their act together. If they do, it is a very cheap stock right now, I think that they have around 2-3 dollars in cash, so their business is virtually free while they are trading at $5. STK aims at higher end markets than SDLT.
Well, that's all for now. On balance, it seems to me that there are plenty of risks out there, but there is potential as well. |
