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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Z Analyzer who wrote (7323)	11/10/1999 11:06:00 AM
From: Hungry Investor	Read Replies (1) \| Respond to of 9256

Z- <<So many of the in favor stocks have valuations I can't begin to understand or justify. And we wouldn't want to be the last ones to the party.>> That's just it isn't it... the "in-favor" stocks achieve valuations that we cannot understand just as the "out-of-favor" stocks (read drive makers) have valuations that we cannot understand. I agree that many of the fibre channel stocks are overvalued - find new ones coming to market that will be the next market darling - difficult as always, but the reward for making a correct guess is great (and the downside for being wrong is not as great). Vixel on the downside is a good example. People had plenty of time to get out of this "me too" stock that is not performing well. We all like businesses that we can get our arms around and feel good about, or that we know intimately. The market, however, as we all know does not necessarily reward these companies. There are exceptions as always and I don't want to get 45 responses of them. UPS today is a great exception. It will do well and I for one will be buying shares at a reasonable level. The "fine minds" bit was an attempt at being diplomatic in a forum where I knew that if I proposed a new idea, it would get trashed. No apologies from me for thinking in a different direction. In truth, there are many people on this thread that know a great deal more about these drive stocks and their prospects than I. However, these stocks are and have been out of favor for an extended period of time. Best regards, Scott.

To: Z Analyzer who wrote (7323)	11/10/1999 12:09:00 PM
From: Stitch	Read Replies (3) \| Respond to of 9256

Hi Guys, Dropped in to catch up with the posts and was surprised no one had commented on the news from Fujitsu so assume that you have not seen the following: (Discussion?) <<Gillian Munson (212) 761-6070 gmunson@msdw.com KEY POINTS: - We attended a lunch today with Takashi Takaya, Fujitsu?s acting CFO. Fujitsu (covered by T. Yamamoto, Strong Buy) has a number of technology business lines. We focused on the company?s disk drive commentary. - Fujitsu has been one of the fastest growing disk drive companies (in unit terms) in recent years growing from 3% share in 1995 to 13% share today. In part, these share gains have been looked at as a cause of tough industry pricing. - Per Mr. Takaya, Fujitsu, like other disk drive companies we cover, continues to experience declining prices in disk drives for desktop PCs. - Mr. Takaya indicated that if pricing pressures continue, Fujitsu may reduce or withdraw its desktop disk drive business effort. This is new news and will be critical to watch. This is also interesting given the recent departure of Larry Sanders, President and CEO of Fujitsu Computer Products of America. - At the same time, Fujitsu made it clear that its notebook and enterprise disk drive businesses are on track and profitable. As a result, we doubt the company is thinking of reducing these businesses. - From a stock perspective the potential departure of Fujitsu could mean a couple things. If Fujitsu were to close down the desktop disk drive business, it would be positive for all the disk drive players with more emphasis on Western Digital (WDC, Neutral) and Quantum HDD (HDD, Neutral) who both are mostly desktop players. For Seagate (SEG, Neutral) this would be a positive but not as much of a positive owing to Seagate?s large enterprise business. If Fujitsu sold the desktop business (vs. closing it) it would be viewed as a positive because in disk drives 1 plus 1 is rarely 2, but not as much of a positive as an all out departure. DETAILS: We attended a lunch today with Takashi Takaya, Fujitsu?s acting CFO. Fujitsu has been on the fastest growing disk drive companies (in unit terms) in recent years rising from 3% share in 1995 to 13% share today. Fujitsu was No. 5 in overall disk drive unit shipments worldwide with 13% share in CQ3 and 40% Y/Y unit growth. In disk drives, Fujitsu is No. 4 on the desktop with 13% unit share (CQ3 numbers), No. 3 in enterprise with 11% unit share and No. 3 in portable disk drives with 17% unit share. Mr. Takaya said that Fujitsu may be forced to reduce or exit its desktop disk drive business due to the continuing aggressive pricing environment. Fujitsu recently announced new desktop disk drive products and is monitoring the pricing situation closely (especially from competitor Seagate). We believe Fujitsu will take some kind of action by the end of this year. Mr. Takaya partially blamed deteriorating profitability of HDD sales for the poor performance in the company?s Information Processing Division. Fujitsu has lowered its FY1999 operating income forecast for the Information Processing Division to Y30B, down from the original forecast of Y100B and down from Y94B in FY 1998. Fujitsu said sales in this division were also hurt by Y2K-related purchase delays in mainframes. T. Yamamoto covers Fujitsu and estimates that Fujitsu?s operating profit for its HDD business will decline to (Y20B) in FY1999 from Y10B in FY1998. The desktop HDD business is estimated to be approximately 60-70% of Fujitsu?s total HDD units and approximately 50% of the company?s total HDD revenues. Although Fujitsu is may exit its desktop disk drive business, its notebook and enterprise disk drive businesses are on track and profitable. In fact, Mr. Takaya indicated that if Fujitsu could get more heads, then the company would be able to sell even more notebook and enterprise disk drives. -------------------------------------------------------------------------------------------------------------------------------------------------------------- The information and opinions in this report were prepared by Morgan Stanley & Co. Incorporated (?Morgan Stanley Dean Witter?). Morgan Stanley Dean Witter does not undertake to advise you of changes in its opinion or information.>>