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

To: Return to Sender who wrote (8083)	3/10/2000 10:43:00 AM
From: Berk	Respond to of 9256

I agree about the false starts. Sometimes the market just overlooks a sector because it is so enthralled with others and the underlying fundamentals just get better. As an aside I was at a meeting a couple of weeks ago when a friend was remembered a comment that an investment banker had made to him years ago. The essence of it was that "you guys will hate us, we've thrown so much venture capital at the DD business that it will create terrible competitive conditions for the industry." What had brought about that comment was that I had remarked that I liked SEG and VECO because of the underlying fundamentals (dirt cheap). Well, I think that comment still stands for some of the other players.

To: Return to Sender who wrote (8083)	3/10/2000 10:55:00 AM
From: Gus	Read Replies (3) \| Respond to of 9256

I think this time may be truly different for the DD industry. The vertically integrated players -- SEG, IBM and Fujitsu -- practically control this industry now and can moderate behavior or induce negative financial returns should the more aggressive players get out of control and start adding capacity out of proportion to their place in the pecking order. This actually mirrors the inverted pyramid structure that is becoming more evident in the capital-intensive mainstream chip business. For instance, SEG continues to dominate the high-end with the most mature and stable fibre-channel 7200/10000 rpm drives -- with a roadmap that includes 15000 and 22500 rpm -- while it continues to control the low-end with their U series of drives. That vise-like power sets up their efforts in the SAN/NAS markets, portable drives and home networking drives. IBM, the inventor of the disk drive, is very competitive in the high-end, totally dominant in portable drives, and always a faustian source of merchant heads, media and channel electronics. Fujitsu continues to be the dominant Japanese computing company and even though it has shown signs of flagging in its resolve to be competitive in disk drives, I believe it is still committed to narrowing the gap between itself and IBM/SEG. Even with the addition of a 3rd presumably highly automated $250M factory in Singapore, Quantum has to increasingly look at the SAN/NAS and home networking markets for growth instead of depending on the high-end DD market where SEG, IBM and Fujitsu have increasingly shown no compunction at making each market share advance as expensive as possible. WDC is just hanging on by a thread while its NAS/SAN (Connex) and data warehousing (Sagetree) businesses gain traction so I don't think it has the appetite to go up the food chain for a while. Maxtor's biggest mistake may have been to sell Symbios Logic to LSI because Symbios Logic would have been a perfect complement to its efforts to look for growth in the SAN/NAS and home networking markets instead of the high-end DD market. It's a good thing that NTAP and the Fibre Channel stocks are driving the valuation of storage stocks upwards because there is no doubt in my mind that the out-of-whack demand for those premium-priced stocks with low revenue bases but torrid growth rates will be easily transferrable to these extremely value-priced but revenue-rich disk drive companies once they start showing a new and distinct growth patterns and credible corporate behavior congruent with the state of uneasy equilibrium that is being relentlessly enforced by the vertically-integrated players. There are very interesting times ahead for this industry.