Found this on the WDC thread, maybe there is hope for us!!!
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My apologies, I should have said "IMO 7 is the bottom".
This article lends a little bit of hope for the not too distant
future.
The bold face is mine.
April 12, 1999
Analysts Think Disk-Drive Makers
Have Put Grim Year Behind Them
By CHRISTOPHER GRIMES
Dow Jones Newswires
Although the PC market didn't perform as well as some had hoped in the
March
quarter, three of the four U.S. disk-drive makers are expected to report greatly
improved profits for the period.
Only one independent U.S. disk-drive maker, Western Digital Corp., is still
smarting
from last year's miserable slump. The other three, Seagate Technology Inc.,
Quantum
Corp. and Maxtor Corp. are expected to show healthy earnings growth for the
first
quarter.
The disk-drive industry was roiled last year as an industrywide glut hurt
prices. But the
excess inventory has been coming down steadily for three quarters, analysts
said.
"Everybody did a good job of producing close to [actual] demand" in the first
quarter,
said James Poyner, an analyst at CIBC Oppenheimer Corp. "We are miles
ahead of
where we were a year ago. A year ago, [disk drives] were being sold at negative
gross
margins."
At the beginning of the year, some market researchers thought the PC market
would
overcome its usual first-quarter softness. This wisdom held that companies
would spend
more at the beginning of 1999 in efforts to get ready for the year-2000
problem. That
would offset the post-Christmas hangover that usually strangles the market in
the first
quarter, the thinking went.
But this scenario turned out to be too optimistic. Indeed, top PC maker
Compaq
Computer Corp. issued a market-shaking profit warning Friday, indicating
that sales of
personal computers were less than expected.
Seagate was somewhat shielded from the weakness in the PC business because
of
healthy demand for disk drives used in large computer servers, Mr. Poyner
said.
"The server market held up OK," he said.
The analyst expects Seagate to have earned 44 cents a share on sales of $1.83
billion,
compared with a loss of 10 cents a share, excluding special charges and related
tax
effects, on $1.68 billion in sales a year ago. A First Call consensus estimate
puts
Seagate's earnings at 46 cents a share for its fiscal third quarter.
The bulk of Quantum's profit is expected to come from non-PC sales, too. The
company has a prosperous business of selling recording tape, an operation that
"rolled
along well" in the March period, Mr. Poyner said.
He estimates Quantum earned 35 cents a share on sales of $1.36 billion,
compared with
two cents a share on sales of $1.29 billion in its fiscal fourth quarter a year ago.
A First
Call survey put earnings at 33 cents a share.
Western Digital is beginning to reverse the problems that led to a
dismal 1998. After
falling behind on leading-edge technology, the company inked an
agreement with
International Business Machines Corp. that has helped it introduce
new drives using
GMR heads, a budding industry standard. Western Digital is also
bringing down
production costs.
But the company will likely post losses at least into the first half of 1999,
analysts
project. Mr. Poyner estimates Western Digital lost 67 cents a share on sales of
$703
million, compared with a loss of 51 cents a share on sales of $831 million in
the fiscal
third quarter a year ago. Analysts surveyed by First Call estimate a wider loss
of 68
cents.
"They're making overall progress," Mr. Poyner said. "Their product
line is in fine shape.
... We think they've got a decent chance of profitability in the
September quarter."
The resurgent Maxtor is expected to have gained PC market share in the first
quarter,
however, boosting its profits in a weak environment.
Robert Hanson, an analyst at Merrill Lynch & Co., said Maxtor's unit
shipments actually
increased slightly in the period, even though PC sales industrywide likely fell
about 10%.
"That indicates the company is gaining market share," Mr. Hanson said. "And
not only is
it gaining market share, it's doing so in a profitable fashion."
The analyst expects Maxtor to have earned 17 cents a share, excluding a charge
of a
penny, on sales of $680 million. That compares with earnings of 10 cents a
share on
sales of $550 million a year ago. Mr. Hanson's estimate is in line with the First
Call
consensus. |
