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

To: Kevin Linder who wrote (8257)	4/16/2000 12:41:00 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 9256

>> I just have to wonder if the pricing is so low that there is not much margin of profit even if prices remain stable. << That maybe the explanation of why WDC is still losing money. The silver lining is that with such low margins capital investment in DD equip stops because there is no reason to invest just to lose money. So if and when demand outruns supply, the DD companies will mint money for a couple of quarters until supply ramps up and everything goes down the toilet, again. Is there a way to find out how much excess capacity still exists in the DD components and assembly business ? From reading the posts here it seems the supply is infinite. I really can't believe that. I just can't imagine that all these managements can't find a better use for their resources than to subsidize cheap supply for Dell, Gateway, EMC, etc.... But the evidence so far is against me. -Sarmad

To: Kevin Linder who wrote (8257)	4/17/2000 2:35:00 AM
From: Mark Madden	Respond to of 9256

Kevin, <I just have to wonder if the pricing is so low that there is not much margin of profit even if prices remain stable. > IMHO there are two forces to increase profits as prices remain stable. First, as the areal density doubles in the next 12 months, the cost of drives should lower because of fewer components. Of course this will have a greater impact in the higher capacity drives. Second, the number of units may increase 20% over the next year. We have been seeing 15% unit increases over the past few years but it looks like growth is negative because revenues have been falling. This is because prices had been falling over 40% per year. On the negative side the design life of some drives can not be much more than 6 months with the areal density increasing so fast. This does not give much time to pay off research and start up costs. Regards, Mark