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Technology Stocks : Seagate Technology - Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Mark Madden who wrote (1221)	11/30/1999 1:02:00 PM
From: Sam	Read Replies (3) \| Respond to of 1989

Mark, Thanks for providing the link. Interesting interview. I've reproduced it below so that it won't disappear next week or month. I've bolded two passages that I found especially interesting. Putting them together, SL basically seems to say that Seagate won't buy Maxtor, WDC or HDD, since they don't have anything to offer technologically. He won't buy just to consolidate. His statement that the others aren't investing in fundamental R&D is a mite ingenuous, since they depend on the independents for much of their component R&D. He also neglects to mention for obvious reasons that somehow even though the others are dependent on the independents they have managed to jump to 10 gig disks while Seagate has not. He does make the prediction--or at least strongly implies it--that next year will be different, that somehow Seagate's technology will allow them to increase areal density faster than the independent component companies will allow the other three to do so. Does anyone have any notion of why he might make that claim, or is it more bluff than substance? Perhaps he would buy a component company like RDRT or HTCH for their technology? Just a WAG. An Interview With Stephen Luczo By Joseph F. Kovar Computer Reseller News 1:53 PM EST Wed., Nov. 24, 1999 CRN: What is the business climate in the hard-disk drive industry? Stephen Luczo: From a unit demand perspective, business is good, both at the personal and the enterprise level. But price is competitive. Except for Seagate, hard-disk drive manufacturers are not profitable. We can't sustain that. However, prices have recently firmed, while supply has tightened. CRN: How did Seagate remain profitable? Luczo: [We] executed our sub-$1,000 PC strategy last spring. Most of our competitors focused on mainstream products. But the market shifted quickly. The sub-$1,000 PC market took off faster than anyone thought. Seagate ramped quickly. Others had to shift their products quickly. CRN: But Seagate profits are now down compared to earlier this year. Luczo: On an absolute basis, profits have been a disappointment. But on a relative basis, we've been very successful. We've maintained profitability, which is better than we expected. It may only be $16 [million] to $17 million, but it's better than losing $100 million. CRN: What is the prognosis for Seagate's and the industry's future? Luczo: It's getting better. All companies are putting programs in place to control inventory. It's most interesting at the fundamental R&D level. Seagate invests in R&D on the component side, but competitors have not invested so much. Next year, the pressure will be on those who depend on outside sources for the technology to increase areal density. New technologies take a couple of years. Seagate's strategy has not just been about vertical integration in manufacturing. It's also having access to technology. Having access to both is a key. Ownership of technology is a key strategy. We don't want to be dependent on others. CRN: Is the industry due for a shake-up? Luczo: I don't think so. The reason to consolidate is leverage. In the hard-disk drive industry, you don't get leverage in acquisitions. If we do an acquisition, it's for the technology. For instance, we bought Imprimis [Technology Inc.] for its high-end products and heads. We bought Conner [Peripherals Inc.] for its media and software. CRN: At least three hard-disk drive manufacturers have purchased network-attached storage vendors this year. What are Seagate's plans in this market? Luczo: We think we are approaching [the NAS market] better than our competitors and will have something in the next two to three quarters. . . . Our strategy is to work with existing OEMs and our systems-integrator base. Why should I build a sales structure when one already exists? I would rather take our customer base and work with them. CRN: What is Seagate working on in terms of new technology? Luczo: On the tape side, [linear tape-open] is a completely new technology and a new platform. It has its pluses and minuses. One minus is that it's a new technology, with new challenges. But at this point, we've identified the hurdles. Now we are turning them into pluses. Since this is a new platform, we're starting 2000 off with technologies designed in 1999, not in 1980. For hard-disk drives, we're focusing on tracks per inch, head issues, media issues, and motor issues. How to continue a 100 [percent] to 120 percent growth in areal density year to year. There are so many new technologies, including [servo motors], heads, and chips,so many ways to advance areal density. We are also focusing on automation, and how to use it to drive productivity. A lot is being done on the supply side. At Comdex, the new word is "postponement mode." This means waiting to make a decision until the last moment. We want to provide exactly what the customer wants, which means a lot of pressures on the back end. So we need commonality. We need to push technology back so we don't have to prepare a new chip when a product is almost available.