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

To: Sam who wrote (10687)	7/27/2003 12:06:36 PM
From: Gottfried	Respond to of 11057

Sam, IBM did in the early years of tf heads because nobody else made them >No one in their right mind...< Gottfried

To: Sam who wrote (10687)	7/27/2003 2:01:08 PM
From: Sam Citron	Read Replies (2) \| Respond to of 11057

Hi Sam, No one in their right mind will want to produce something as complicated and that changes as quickly as heads 100% in house The source I earlier quoted trendfocus.com contained market share data for the captive HGA segment (as of 4Q02) as follows: Seagate 59.2% IBM 28.8% Hitachi 7.7% Fujitsu 4.3% I assume that since the IBM-Hitachi deal closed at the end of the year, the chart should probably now read, all other things being equal: Seagate 59.2% Hitachi 36.5% Fujitsu 4.3% It also stated that HGA production and consumption by Captive suppliers totaled 92.34 million units during the quarter compared to 84 million OEM HGAs. So overall, the HGA industry appears to be about 55% captive and 45% OEM, which coincides with the thrust of your post and with WDC's stated target. But I still have some questions to help me better understand this industry and the varying strategies of the companies in it. (1) If MXO is now the last player in the industry without any captive capacity, doesn't the WDC-RDRT deal leave them more somewhat more vulnerable to the vagaries of HGA pricing and availability if Matt's logic in defending the deal was correct? OR Alternatively, if heads are as complicated as you suggest, might it not make the most sense to outsource the whole job to the merchant supply base even if it is effectively a duopoly. (With the recent decline in RDRT mkt share it pretty much was a duopoly anyway.) (2) What proportion of its HGA needs does Seagate buy from outside? (3) Are there advantages to supplying a portion of your own HGA needs without also becoming a merchant supplier of HGAs? I can see that it would be simpler and cheaper in terms of SGA expense to just supply yourself, but wouldn't there be a substantial penalty to pay in terms of losing economies of scale. (4) What proportion of the cost of producing a HDD is the HGA component? Has this proportion been trending up or down over time? (5) Who is considered the technology leader in HGA space? I am just beginning to get a sense of the different strategies WDC, MXO, and STX are employing with respect to HGAs: MXO: 100% dependence on merchant suppliers STX: produces the majority (?) of its HGA needs internally with no stated aim of becoming HGA merchant WDC: goal of producing 50% of HGA needs internally and open to possibility of becoming HGA merchant Sam