<<An interesting question is, Who's doing the order cancellations?>>
IMO it is IBM/WDC and QNTM. Desktop segment looking poorly. Very poorly. I wonder if this PC/DD market dip is going to pick any flys out of the ointment or is it going to lead the charge for a wholesale fogging of the house.>
WDC is not a TSA customer and if you read this PR, this is a TSA problem.
<The company said it had been adding to its production work-force in anticipation of significant order increases for delivery primarily in its fiscal third quarter (ending June 26). In the last week customers significantly reduced their anticipated demand. In addition, efficiency in producing certain TSA suspensions has improved more quickly than expected. ''While we still expect shipment levels in our third quarter to exceed those of our second quarter, the decrease from our earlier expectations, coupled with our improving production efficiency, temporarily leaves us with too many production employees until customers again increase their demand,'' said Wayne Fortun, president and chief executive officer of Hutchinson Technology.>
Certainly looks like an entire program might have hit the skids. So, maybe rather than looking at a general problem, there could be a specific problem that had been expected to ramp, but hit problems??? Could a company like Maxtor have planned an aggressive move to GMR using TSA, but had ESD or other problems totally blow the program out of the water? This could have put them back a month or quarter, causing first great anticipation for buying TSA followed by great disappointment?
Has too high production efficiency really become a problem?
It's easy to think the whole industry has gone wrong, but would Hutchinson really get one weeks notice from every drive maker at the same time? Maybe so, I don't know. If so, is it time to run for the hills cause this sector is going to hurl big chunks tomorrow?
So, where does TSA go? You seem to be looking for the desktop as the problem, but I think the majority of TSA goes first to mobile and then to high-end. Z or Tim can probably give us a better break down of who buys what, but I doubt it has anything to do with desktop sales.
<''Deciding to reduce our work force was difficult, even if the reduction is temporary,'' continued Fortun. ''We hope to see all our employees back in our production areas as soon as possible.'' The company will seek volunteers for this temporary work-force reduction but, generally, seniority will be the basis for determining which employees will be laid off at each facility. All employees affected will continue to receive company health benefits and holiday pay, and will continue to accrue vacation time.>
Is this typical to lay people off, but keep on paying their medical and accuring vacation time? Is this a sign that they expect the problem to be resolved quickly, or standard procedure?
I caught a PR last week basically about companies meeting some government official from Thailand for investment in new factories and Hutchinson was listed among the names. Are we going to see them finally shift production overseas? 550 guys in Minnesota must cost about the same as 5000 in Thailand.
They still expect unit volumes in the third quarter to exceed this quarter and they expect this quarter will meet expectations. So, how much has been built into this third quarter? Will the cost of laying off 550 people kill earnings?
Regards,
Mark |
