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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Mark O. Halverson who wrote (9243)	3/8/2006 1:03:45 PM
From: Sam	Read Replies (3) \| Respond to of 9256

Do you think present price cutting is temporary and that business will then continue its robustness and growth? Price cutting in the DD sector is always temporary--that is, it always ends at some point. Price cutting in the DD sector is never temporary--that is, historically at least it can be counted on to recur with alarming frequency. Hence the low PEs and low PSRs. This particular round of price cutting probably relates to both the the MXO/STX merger (with WDC trying to get some share from the future combination, and STX trying to maintain it) and problems in the PC business leading to PC vendors trying to play these fierce competitors off of one another, asking for price breaks in a business where volume is nearly everything. Personally, I think that at some point both STX/MXO and WDC will be buys, perhaps even great buys. Is that point now? Well, I think buyers here will make money--eventually. But the stocks probably have more downside in them right now. But the future has always looked bright for DD stocks and, at least as far as profitability is concerned, it never really has been. The leading vendors have all stumbled at one time or another and they've each also had their day in the sun. For investors, it is something of a crapshoot as to which one will make the better investment at any given time. There has always been expanding demand as far as bytes go, but there have also always been expanding supply and increasing efficiencies in supply. While the companies haven't particularly served investors well--especially very long term investors--they have served customers very well. And they have served traders well for those who have the patience and discipline to buy low and sell high, as the stocks have tended to be highly cyclical. With the business now (or at least soon) down to 2 major competitors, one could hope that the price wars will become less common and profitability will become more common and predictable for both WDC and STX (they are the only two remaining full line vendors; there are others in niche parts of the sector, especially the faster growing parts). We'll have to see, I'm sure Mr. Market will want to wait and see.