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Technology Stocks : Maxtor (MXTR)
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To: DavidCG who wrote (142)3/4/1999 8:51:00 PM
From: Sam  Read Replies (2) of 467
 
What do you expect them to say? That they won't be supplying Dell anymore? And what do you expect Dell to say, that they won't be using other suppliers anymore?

Your own quote says: "Officials <from Dell> also said Dell was not replacing existing suppliers, but instead would use supplies from IBM to produce equipment for expected future growth."
Of course they (Dell) aren't going to ax anyone. Things are too fluid in the drive business to do that. A company is down one year, and sometimes--as in the case of MXTR--it may come back a few years later. They miss one transition, but hit the next one. It is in Dell's interest to keep 5 or 6 suppliers, to make sure that they all stay honest and keep the technology rolling. What this pact appears, at least, to do is that it puts on IBM on a kind of list of "preferred" (my word, not theirs) suppliers. It gives them a place at the table for future programs that they didn't have before. And that could affect all of the drive vendors if they deliver the goods at attractive prices.

A previous poster said that one should note that it is not just drives that are affected, and this is certainly true. It isn't that this pact sounds MXTR's death knell (or anyone else's, for that matter). But it signals IBM's increasing aggressiveness. It makes more production capacity available to the boxmakers. It makes the world that much more competitive for all of the DD vendors. Will this quarter be affected? No. Next Q? No. IBM itself said that they don't expect much from the pact this year. But is it a bad sign for all of the independent vendors? Yes.
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