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Technology Stocks : Seagate Technology -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (4010)	11/4/1997 6:14:00 PM
From: Certafied	Read Replies (3) \| Respond to of 7841

The following was stated and hopefully some confusion and misunderstanding can be cleared. It was stated that: " My feeling is that SEG probably had offseting option position and decided to write off the losing position first (maybe they're required to do so...). So, they'll realize the profit of the opposite position in the future." If I understand this statement correctly then it is grossly incorrect, for the following reason: Segate (SEG) can not write off losing positions without taking into consideration gain positions. They are required to account for these in the aggregate. If there are any gain positions they must be netted against the loss positions. Refer to Financial Accounting Standard 115 (Accounting for Certain Investments in Debt and Equity Securities). The hedging contracts were probably classified as "trading securities" so they are accounted for as follows: "Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings." If you are hoping that there are unrealized gains around the corner from not reporting them in the last quarter and only reporting the unrealized losses, I am sorry to say that there are no unrealized deferred gains which will materialize in the next quarter due to trading activity in the last quarter. The net effect of the gains and losses on unrealized transactions has been recorded in the last quarter. The only chance of a gain in a subsequent quarter is if (i) the market turns around before the hedges are covered, or (ii) Segate continues to venture in hedging and gets extremely lucky at it. Based on what is happening in Asia, I would think Segate would be lucky if the losses are not exacerbated, least of all to expect a gain. These losses will probably become realized. Besides FAS 115, FAS 119 (Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments) determines how the foreign currency hedges are reported. To say the least Segate should stick to manufacturing disk drives and not attempt to become global investors in financial derivatives. They have shined in the DD arena and hopefully will shine again one day. This mess is not over it will take a few quarters to get out of it. Of Course, IMHO