Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Sarmad Y. Hermiz who wrote (8263)	4/16/2000 8:12:00 PM
From: Tom Simpson	Read Replies (1) \| Respond to of 9256

<<From your posts I get the sense that you think they still have significant unused capacity.>> Possibly.....but I don't necessarily put a lot of credence in WDC's numbers anymore. I went and plotted their ppe vs d&a over the last 6 years to see how they managed to look so good before they fell apart. Hindsight won't put my money back in my pocket but may sew up the hole in it for tomorrow :o). Also, if you read the fine print in the 10Q's you'll see that their latest round of ppe writeoffs includes argueable things like MIS sytems so whats there may not be altogether a very reliable capacity metric. I see nothing wrong with your cost analysis per se. But the sticking point is the revenue-unit assumptions. We are all applauding our price stability here as measured by Mark so assiduously each week, but lets remember that price stability=4-5% erosion per quarter. In real life they have to ship 4% more units just to keep the same revenue and there goes the $4 in cost reduction. There is no question that WDC is getting better, its just that they remain behind both QNTM and MXTR and are coming out of it awfully short of financial resources. Wishing as well......Tom

To: Sarmad Y. Hermiz who wrote (8263)	4/17/2000 10:42:00 AM
From: Z Analyzer	Read Replies (2) \| Respond to of 9256

<<To answer your earlier question regarding WDC as an investment. If WDC achieves the same cost reduction in Q2 as Q1, they'll make $4/drive profit. if by the end of the year they get an additional $6/drive in cost or price or mix adjustments, that will be $10/drive in net profit. At 25 million units, that's $250m. At a P/E of 20, that will fetch $5B in market cap, or $30 to $40 per share. >> Teh flaw in the logic is that the other drive companies would become wildly profitable in your scenario and not step up production. Not likely, esp during the summer when gross margins almost invariably fall. -Z