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

To: Z Analyzer who wrote (8228)	4/8/2000 12:43:00 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 9256

>> Probably through higher capacity utilization, one big advantage SEG could have over the independents. << Right. And also perhaps because enterprise drives sell with higher margins. So here's the next piece in the puzzle. SEG stated in the Dec Q CC that they ran into capacity constraints in the "low end of the high end". So at least in that line their capacity util was 100%. And we also read the anecdotal reports from Stitch regarding cancelled Christmas vacations, etc.... So that confirms it. My optimism re DD stocks is based on this. Demand is high in the enterprise market, and supply is short (and got shorter with WDC exit). Would we expect SEG to return the favor and switch some capacity from money-losing low end drives to profitable high performance drives? Or would they do the stupid thing and invest in NEW additional capacity? I don't know if it is that simple to switch an assembly line, but it is possible. Isn't that how markets work ? And if it is that way, just how much excess capacity is remaining in the market ? It's got to be less than 3 months ago. So the next step is where along the profit curve is each incremental drive ? We know that if WDC makes 5.3 million disks per quarter, they lose $70 million. In March Q that loss narrows to $20. But we don't know how many units yet. Supposedly PC sales DECLINED 9% during Q1. Though I don't know how to figure WDC units from that. But in two weeks we'll know. But after the break even point what does each additional drive bring in terms of profit ? $5 ? $10 ? $20 ? until new capacity has to be built. -Sarmad