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Technology Stocks : DSS: DLT finally open for trading -- Ignore unavailable to you. Want to Upgrade?

To: Z Analyzer who wrote (256)	4/27/2000 10:58:00 AM
From: Sam	Read Replies (2) \| Respond to of 488

Well, yes, of course if there are serious SDLT problems, the picture for the next year would indeed be not pretty. And, as you say, it is later than they forecast a year and two years ago. However, fortunately for them, so was M2 and so is LTO. The reason for and the other side of that lateness is this: the attractiveness of the tape sector is that it isn't easy to do. It is a difficult engineering feat to get tape streaming through the cassette at high speed over and over again with accurate recording and without breaking. Also, it is an overstatement to say that management is "forecasting two bad qtrs". They forecast "somewhat" (I'm pretty sure that was their word) lower sequential revenues for drives and media the next two quarters, with flat unit growth and slightly declining AUPs. This will, they believe, be made up for in the second half as SDLT comes on-line, and they realize the cost savings from the transition to Penang and lower materials cost. However, you are right in pointing out that as long as they have not actually announced a ship date for the SDLT "family of products", risk remains. But I think the current stock price discounts that risk--more than discounts it, perhaps. They are selling at a PE of less than 10 right now. Consider: Twenty five percent of their revenue comes from media sales, and while they are forecasting somewhat less growth there, they are still forecasting close to 20% growth for a part of their business that is highly profitable. And another twenty five percent of their business is growing at 40-45% rates, and that should continue through any SDLT transition, and may even increase somewhat as that transition is completed and with the advent of LTO (ATL will be selling LTO libraries as well), and as Snap continues to build. If they bring out, as I expect they will, SNAP systems with backup tapes attached running seamlessly together, SNAP sales will drive more media sales as well. They also hinted in the CC that they will begin to move up the NAS value chain with storage systems of greater than 120 gigabytes, their largest offering so far, as the Snap4000 is made to be extendable (the rap against earlier Snap products was that they weren't extendable), which would create a larger target market and potentially more robust growth. The only way I make sense of their decision to keep 4000 production in CO is that they won't be making them too much longer. They must be ceding the low end to Benchmark and DLT1. Hopefully they have made the royalty payments low enough that Benchmark will sell a lot of machines, driving more media sales, which is where the real profits are anyway, not in selling drives, especially low end drives. I stand by what I said earlier: If their announcement a few weeks hence lays to rest doubts about SDLT coming out before the fall, or if they can at least come out before LTO actually gets going or at about the same time, then the stock is a buy here. The silence in the marketplace concerning M2 bodes badly for EXBT, as well as their comments in their own CC that DLT wasn't selling well last quarter. DLT obviously did sell well for companies like ATL, OVRL and ADIC. It wasn't selling well for EXBT because EXBT wasn't selling it, not because it didn't sell. For a company with the poor--even precarious--balance sheet that they have to not sell whatever they can even if it might help temporarily a competitor is imprudent and even stupid. They need every dollar they can get at this point in their existence, and if they don't get some decent dollars pretty soon, they may not be around this time next year. That too could be a factor in both OEM and potential customer decisions about M2. Furthermore, to repeat something that has been said in other contexts, what difference does it make if you have a tape drive that pulls data at 12mb/sec if the computer system that it is attached to can only deliver it at, say, 6mb/sec? Bragging rights are nice, but a good balance sheet and the right product at the right place at the right time are better things to have in your corner. My opinions. Sam