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Technology Stocks : Disk Drive Sector Discussion Forum
WDC 139.09-0.8%Nov 21 3:59 PM EST
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To: La Traguhs who wrote (6064)4/14/1999 4:01:00 AM
From: Z Analyzer  Read Replies (3) of 9256
 
a few more points worth mentioning:
-the significance of buying back 10 percent of your shares in 3 months should not be underestimated, especially when done so with only modest reductions in cash levels. The continuation of this trend will quickly yield dramatic changes in financial results. You may recall that heavy share repurchases have been one of the things which has been integral to IBM's return from the dead. Buy backs of such magnitude will accomplish what I suggested to Al Shugart years ago when Seagate stock was selling at 12 and about four times earnings. I said, "without being too facetious, pretty soon you and I will be the only remaining shareholders".

A second point worth mentioning from a Devils advocates point of view, is that Seagate has once again become highly dependent on the high-end for profitability. When asked whether the desktop segment was profitable, the response was that it had double-digit gross margins. How impressive double-digit margins are depends heavily on whether transfer pricing of major components such as heads is at market prices or something less. Clearly, the high-end is once again highly profitable. This raises the question of whether it will remain so when competitive 10,000 rpm drives are available in adequate supply. -Z
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