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

To: Sam who wrote (10766)	9/3/2003 10:19:47 PM
From: Sarmad Y. Hermiz	Read Replies (2) \| Respond to of 11057

Hi Sam, I had seen this note. It id his opinion. I don't find it substantiated. But that's my opinion. I had sold all my Maxtor (25k shares) and replaced it with WDC about a year ago. Anyway, I'll comment on the items. >> 1. RDRT is a BIG gamble. << If you don't play, you can't win. WDC now has the chance to take its earnings to $2.00/year in 3 years. ------------- >>My contacts tell me that MM's glorious dream of instant earnings on RDRT is fantasy. << B.S. I don't think he has any contacts at readrite. ----------------------- >> Assuming, for sake of argument, that WDC pulls off the big gamble without any damage to its earnings, it still has accomplished nothing. RDRT production costs, again assuming everything goes perfectly, will be in line with TDK and ALPS. << The savings from vertical integration will be more than $1/head. Or 16%. The annual savings will be at least $100m. ------------------- 2. SCSI. MXO is cutting into Seagate's market share and will continue to do so. I think Tufano will raise his market share goal from 20% to 30% by the end of the year. This is an area of higher margin as opposed to WDC's DT and X-box. << A couple quarters ago I did a detailed analysis of Maxtor's Q report, and my conclusion was that Maxtor had negative margin on their scsi products. Possibly they are doing a little better now. ------------------------------------- 3. One Touch. These are great sellers in the retail market. MXO is fast becoming the retail customer's choice because of the simplicity of the one touch design. << Is there any content in this item ? ------------------------------------ 4. CE domination. There is no doubt that MXO, and not STX, is the number 1 seller to the CE manufacturers. MXO's close relationship with the CE pioneers (TiVo, Replay, DISH, EchoStar, Sony, etc) insures a bright future for Maxtor. << Big deal. The entire CE market next year is estimated at 9m units. Which is maybe 5% of total revenue. QUite likely those drives are also sold at negative margins. --------------------------------------------------- 5. Tufano. Yeah, that is right take Tufano over MM. MM accomplishments came as a result of the MXO/HDD merger and MXO's inability to execute during the 18 months following the merger. WDC benefited. The advantage is over and Tufano, on an even playing surface, will outcoach MM. << So the only proof he offers is that his hero makes huge mistakes, and that's why he's such a great guy. ------------------ 6. China. There is a reason that big tech cos. like Intel are locating manufacturing in China. In 04, Maxtor will be producing there. The benefits will be on both ends, ie. reduced costs and a presence in the next great PC market. << Finis Conner got some investors to form a company to make drives in China (Great Wall Manufacturing ??) and went out of business before shipping their first drive. Lots of western companies find China impossible to work in. --------------------------------- 7. There is a reason that Seagate spends so much time badmouthing Maxtor. Seagate fears Maxtor. << Where's the proof ? ---------------------------------------- 8. Maxtor went through a rough 18 months following the merger and learned a lot. It learned not to even bid on RDRT. It learned to slash OE to 115mm per quarter while continuing to develop leading products with R&D money. It learned to be modest, and let the numbers at the end of the quarter do the talking. It learned that making profits leads to the ability to sell your conv. at a 125% premium and have it oversubscribed. It learned that becoming a legitimate threat to STX would cause STX to unleash its bankers to badmouth and downgrade. It learned that the best way to silence the STX minion is to execute. << Suffice to say, wdc added $300m to its cash last year from internal cash flow and totally paid off all debt. Meanwhile Maxtor borrowed a like amount from its bankers and diluted its stock with a convertible offering. ANd it is the bankers of that offering that are now pumping its stock. -----------------------------------------------