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

To: Robert Douglas who wrote (8129)	3/22/2000 12:46:00 PM
From: Tom Simpson	Read Replies (1) \| Respond to of 9256

Ooooops....you're quite right there Robert, 325 mil in "unusual" charges. So much for my density. Shucks, I forgive me, it was late at nite :o) Would have had them roughly even without those charges. <<Also, I think that it is more remarkable that they have the highest gross margins during a time period when all the "virtual" makers are being subsidized by losses at the component suppliers.>> That is an interesting point and well worth thinking about. In theory, SEG can't be subsidized in that way. But if this is so, we are truely looking at a 20% gross margin manufacturing business consuming one whale of a capital chunk in manufacturing resources. The truth is SEG must have much higher gross margins in order to generate a proper return on their much higher ppe. I'm not so sure that the others are now being subsidized by supplier "losses". Its a little tough to tell because RDRT is the only independent head supplier left one can actually look at. But a substantive chunk of the red ink this last year has been excess ppe, and, having done that, margins are generally drifting back towards reality, ergo no ongoing subsidies to the virtuals. Seagate on the other hand still looks pretty fat in the ppe area which makes it tough for them to improve their gross margins going forward, unless of course, they take the dreaded red bath the others have already gone thru. Not something I'm sure of, but my uncertainty here was enough to make me swap my SEG shares for HDD shares :o) I think what I'll do here is to go back a year, maybe two, and put a historical perspective on the manufacturing ppe needed to support sales and gross margins....MXTR and SEG would seem most stable to model that way. Best Regards.....Tom