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 : Western Digital (WDC) -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (10675)	7/26/2003 12:24:47 AM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 11057

>> I think it's over. >> The market values E growth and there is none predicted for next year. Gottfried and Sam (both Sams) Gottfried, I agree that there will not be torrid growth in earnings. The attraction of wdc is that it deserves to have a reasonable P/E. At least 15 in todays low interest climate. Right now the P/E is 10. So there is 50% conservative up-side. But the new asset buy can expand this by another 30% or more. 1- before its troubles, RR was getting 16% gross margin. On a $6 head, that's $1.00. A $buck is very modest, except when applied to 60 m heads. That's 30c/sh annual. Actually wdc likely uses 120 m heads, but I'm projecting 50% from internal production. 2- Removing a desperate RR from the merchant realm deprives other drive makers of a bargaining chip in getting concessions from the remaining two suppliers. 3- more important, taking out RR removes supply from Samsung who seems to sell their drives at a huge loss. They sell very few units, but they force the big three to lower prices. Maybe they'll take this opportunity to get out of the business. 4- Number of units sold is increasing for all disk makers. And very strongly for wdc. I think about 20% this year. If this continues another year with no price erosion, then $1.30 to $1.50 earnings for wdc in a couple of years are very likely. 5- Remember that not one single analyst forecast $1.00/yr earnings for wdc a year ago. They were projecting 45c. And WDC stock dropped to under 3. Personally, I'm very pleased with the asset buy. And I think it is the best use of cash for wdc. Sarmad