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To: 16yearcycle who wrote (122236)	3/30/2001 10:35:02 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 164684

Eugene, >> Would you tell us about WDC in detail, assuming you still think it is reasonably priced? The general WDC bet is that the disk drive industry will encounter expanded applications and markets. That the technology is very demanding, and new entry into the business is very difficult and costly. And that the current companies in the business have survived intense competition. So it is not likely that a new-comer can dislodge them easily. The specific bet at this particular time is that with the recent consolidation (today was the completion of the merger of Quantum and Maxtor), there are just two public companies left. WDC and MXTR. Both their CEO's have said many times they desire "rational" pricing. The stocks have been priced as though they are on the verge of bankruptcy. However, at this time they are much more secure financially than in the past two years. And they are on the verge of going from losses to profits. So if they are on course to making 50c/sh on expanded units, increased rev, and larger market, then they may become darlings and overshoot a little to the up side. At a P/E of 20 or more, then they could very well double in price. I am very convinced of the potential. But then, I am easily amused. However, I don't know anyone who says we will have less need for data storage devices in the future. Everyone talks of explosive demand. Just so you know I might not be very objective in my opinion, I have a large position in WDC. My most recent buy was 10k shares at $3.45. In the past the shares have run up ahead of earnings, and fallen after the report. Anything could happen this time, too. --------- A recent item: PRESS RELEASE: Moody's Outlook For Western Digital Stable Following is a press release from Moody's Investors Service: New York, March 26, 2001 -- Moody's Investors Service revised Western Digital Corporation's ratings outlook to stable from negative and confirmed its Caa1 rating on Western Digital's $275 million 5-1/4% zero coupon convertible subordinated debentures, due 2018, currently outstanding at their discounted accreted value of $113 million. Moody's additionally confirmed the company's B2 senior implied and B3 senior unsecured issuer ratings. Moody's revised outlook takes into account the profound transformation of Western Digital's hard disk drive (HDD) business over the past threeyears as the company has persevered to survive through the most protracted downturn in the relatively brief thirty-five year history of the modern hard disk drive industry. Draconian measures to restructureits organization, consolidate manufacturing operations and businesslines, and reduce expenses and curtail capital spending requirement, accompanied by the repayment of its term bank loan and negotiated redemptions of outstanding convertible subordinated debentures held by institutional investors have enabled the company to adjust its balance sheet and restore liquidity to a scale commensurate with its current level of activity. Additionally, amid the turmoil, the company was able to overcome a FY2000Q1 recall of its leading line of desktop drives after discovering a reliability problem emanating from a defective component manufactured by its power driver supplier, STMicroelectronics (A3 senior rating). Excluding Western Digital's new business ventures, which have yet to become profitable, the company would have recorded an adjustedEBITDA of nearly $21 million for the LTM ended December 29, 2000 from the core HDD business. The debt leverage associated solely with the HDD business, while remaining substantial, would have been pared to 5.5 times EBITDA. Moreover, LTM EBITDA would have provided 3.5 times coverage of pro forma annual accretion on the zero coupon convertibles outstanding. The stable outlook is additionally supported by the latest phase of consolidation within the disk drive industry, highlighted by the pending merger of Quantum's (Ba3 senior implied) Hard Disk Division into Maxtor (B1 senior implied). This development, contemporaneous with the leveraged recapitalization of merchant market leader Seagate Technology (Ba2 senior implied), renews the prospect for industry-wide capacity rationalization and may lead those desktop OEMs which would potentially derive a substantial majority of their disk drives from the merged Maxtor/Quantumentity to reapportion order volumes among the merchant drive manufacturers. The impact of seasonally weak personal computer sales in calendar 2000Q4 on disk drive shipments was mitigated by components shortages that constrained drive production and contributed to firmer average selling prices (ASP). Western Digital has remained competitive by further refining a strategy that has eschewed vertical integration, and by withdrawing from the enterprise drive segment where profits continued to be elusive. In 1999, the company sold its capital intensive hard disk media operation to Komag and entered into a three-year volume purchase agreement with Komag under which it assumed an obligation to purchase a substantial portion of its media requirements from the disk media manufacturer. Western Digital Corporation, a manufacturer of hard disk drives for the personal computer and emerging audio-visual markets, has recently relocated its headquarters to Lake Forest, California