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Technology Stocks : Hutchinson Technology, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Lord Peter Wimsey who wrote (1450)	1/22/2000 2:02:00 AM
From: Hectorite	Read Replies (2) \| Respond to of 1487

Friends, I'm trying to see the silver lining, but I have to face facts that my investment in hutch is going to take a long time to pay off. Here's how I see it: 1. Cloud: Management did not see the demand problem coming, ignored signs, or both. From Dec98 to Dec99 quarters, total suspensions shipped were 144, 149, 147, 144, 134. Do you sense a pattern here? Demand was going nowhere despite the recovery in drive volume. During the period Htch was aggressively ADDING capacity, which they now have to eat. This demonstrates that management was either blind (they should have seen it coming) or blind-side (their customers didn't go with the products they said they would). Probably both. LINING: I don't think there is one. Management screwed themselves. 2. Cloud: The will continue to be screwed by improvements in density and drop in average suspension/drive ratio. From 98-99, average susp/drive went from ~4.7 to 4.0, They expect the ratio to be 3.6 by next fall. Obviously, the total amount of storage being sold by the drive companies is increasing very fast, but the total number of drives is not increasing nearly as fast. So despite sustainable health growth in storage, Hutch participates on a much flatter trajectory. Lining: Well, I guess once we get to ave. susp/drive = 1.0, we'll be in business (unless somebody figures out how to use half of one). By that time, will some other technology be making inroads? 3. Cloud: Failure to get SEG or IBM on significant new TSA ramp. Lining: On the conf call they said IBM's wired suspensions operations are on last legs, and they are still hopeful on SEG. Is anybody else sick of hearing of how they are "working" with SEG? On the Sep99 conf call, they expected SEG to start taking product in volume this quarter. Now we're back to "someday." Well, Fortun and co. may lack vision (see 1), but I don't think they are liars. It's going to happen. 4. Cloud: Average Sale price and margins. Even with TSA growing as % of product mix (now 54% ASP and GM sliding downward. For example, TSA mix from 99Q3 to 99Q4 went up 10%, GM went up only 3%. Management said in conf call that are starting to reduce the RATE of price reductions, but can only do so to a limited extent. The currently have 40% of the wireless suspension market, a lot sure, but that means 60% are using solutions that are working out OK. Hutch has little pricing power. Lining: Making #3 lining happen would be a good start, then maybe actuated TSA will save the day in a couple of years. Please tell me I'm all wrong.