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Technology Stocks : Seagate Technology

STX 261.38

+1.2%

Nov 17 4:00 PM EST

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To: Mark Oliver who wrote (6976)	3/1/1999 8:24:00 AM
From: William Epstein	Read Replies (2) of 7841

Mark Oliver; You have raised some very interesting questions concerning the HDD industry's prospects, going forward. However, while I was reading your post some nagging questions popped up. Are all the companies in the HDD industry the same? Do the all have the same financial, marketing and sales structures? Do they all have the same product lines? Is the HDD industry a commodity based industry with one basic product? And finally, do all of the HDD companies have the same focus? Of course, not! SEG is a HDD company that tends to focus on the high end of what is being offered. In this segment of the mass market it is unparalleled and really has no competitors, at the moment. It has more advanced technology in the pipeline and if it can bring that technology to market, in time, it will remain so. That doesn't mean that it doesn't have to compete with the other drive makers in the PC industry for some of the lower end business but its margins can be greatly enhanced by its higher end business. People will pay a lot more for technology than they will for a commodity. A television costs $300 but top 21" CRT costs $1500. They are both televisions but not the same thing and a CRT doesn't cost 5 times what it costs to manufacture a television. The difference is profit margin. If SEG can outdistance its competitors the difference will be directly reflected in its margins. A company can grow its business even when overall demand it flattening out by the way it does things. One need only review the recent histories of the the big 3 auto manufacturers to see it. Ford and Chrysler have grown their businesses at the expense of GM and some of the foreign manufacturers because their focus has changed. Ford will be the largest auto company in the world next year, for the first time in 70 years. Part of the reason it that all are focused on global markets but Ford was out there first and has a well developed global market share. The market for PCs is just beginning to really go global and for the HDD industry as well. In the future, one may not depend on the other. I'm sure that PCs will be manufactured worldwide by many more companies than there are today. They will all need DDs. We are also seeing differeniation in PCs. Special purpose PCs from the highest end to to lowest end of the spectrum. Something that really wasn't available 2-3 years ago. I expect that trend to continue. Segments of the market will become focused and specialized components will be needed to produce these targeted PCs. PHOTOMAN

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