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To: Gottfried who wrote (6515)	7/25/2003 2:51:24 PM
From: ALTERN8	Respond to of 13403

CRA ST bot 1000 @ 9.56

To: Gottfried who wrote (6515)	7/25/2003 4:01:36 PM
From: Sam Citron	Read Replies (1) \| Respond to of 13403

OT Gottfried No, STX and MXO have both declined slightly. What especially concerns me is that now WDC cannot buy cheap [under cost] heads from RDRT any more. This is too patently obvious for it to come as any surprise to WDC management. Even a bankrupt entity cannot afford to sell products at a loss indefinitely, so the windfall WDC enjoyed could not have been prolonged in any case. WDC then had a choice: It could do nothing and wait for the inevitable disruption in its supply chain as RDRT's plant was either shut or bought by someone else. Or it could act proactively by making the supply arrangement a captive one by purchasing the plant itself and therefore having more control over their destiny. I do not know the industry well, so it would be foolish for me to secondguess WDC's decision. In my experience, the analysts are also generally dumber and much more risk averse than the companies they cover, so I would have to give WDC the benefit of the doubt. Certainly there's a supply-chain disruption, as the analyst said, but what he failed to say was that it was unavoidable. RDRT was selling the heads at a loss as a temporary measure to operate as close to breakeven as possible pending a sale of their assets. The surprise is that it was a surprise at all. RDRT had a big share of the head assembly market. WDC and other companies that enjoyed the windfall may have hoped that a Japanese company would buy the plant and continue to keep things going as long as possible per the status quo. But obviously that didn't happen. If you buy the argument that the fundamentals of the HDD industry have improved as the weaker players have failed and more uses for HDDs have sprung up, there is no reason why such a return to health should not benefit suppliers to the industry as well. As we know from the semi equip industry, the supplier industry is more volatile than that of their customers, so they need to have very clean balance sheets to ride out the inevitable periods of drought. With the acquisition the former RDRT is now better capitalized (less debt) and somewhat more diversified (integrated). Thus it should be a more viable entity. The question is how Maxtor and Seagate will regard buying head assemblies from a HDD competitor. What choice do they have? Sam

To: Gottfried who wrote (6515)	7/25/2003 4:25:53 PM
From: Sam Citron	Respond to of 13403

OT Gottfried Here's why WDC might be expected to make a go of it in the head assembly business where RDRT couldn't: In RDRT's 4/29/03 filing they had $4.2 million in cash against $175 million in debt, of which $100 million was current. readrite.com Contrast that to WDC's balance sheet: 0 debt (even after this aquisition) and cash of $347 million before this acq or about $253 million after. Just prior to their filing BK, RDRT "blamed its limited cash reserves for its inability to "maintain a smooth flow of materials and components to its Thailand operations." Read-Rite said it continues to look for additional sources of financing to fund the production ramp of its 80-gigabyte products." thestreet.com Now this problem should be solved. Sam

To: Gottfried who wrote (6515)	7/25/2003 10:29:07 PM
From: Sam	Read Replies (1) \| Respond to of 13403

OT--WDC Gottfried, RDRT has been miserably managed for years and years now. The heads business isn't an easy one, but if WDC can get it under control, this could be a great deal for them. Or it could suck them dry, as DEC's heads business threatened to do to QNTM years ago. That is the risk. But RDRT's management was so bad that anything will be an improvement. The question is can WDC get the R&D part of it down? They have some cash to play with and buy some talent. I sold my WDC awhile ago way too early at a little above 7. I'm still on the sidelines with it right now, as I expect the market to correct in another month or two and I'm not making any new investments, just selling as we rise. But I'll keep watching the stock with interest as things settle down in here. Could be a disaster or could be a great move. ( How's that for waffling? Guess I should be a politician, huh?) Sam