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

To: Certafied who wrote (4040)	11/8/1997 3:46:00 AM
From: Joe E.	Read Replies (2) \| Respond to of 7841

Re your: "Why shouldn't SEG fall to a PE of ~15 resulting in a price of ~$17? Has the market over-reacted to WDC and QNTM? Is the market artifically over-valuing SEG?" Well, the disk drive companies are characterized by swings up and down in profits. So any one year's 12 month trailing profits might be high or low compared to what investors expect for the future. Seagate is generally thought to have a reasonable potential to earn $2 in an average year, with good prospects to grow in size as the industry grows. So, SEG is trading around 15 times earnings (well, more like 13 times), but think normalized earnings, not trailing earnings, and it makes more sense.

To: Certafied who wrote (4040)	11/8/1997 8:45:00 AM
From: Certafied	Respond to of 7841

Remember this post (Motley Fool) (excerpts)(Bolding and underlines added): "Other things in the conference call: The other thing he (Al Shugart) felt the need to mention early on is the fact that there may be $50-$100 million in restructuring charges in subsequent quarters (as stated in the press release). The thing that bothered me most was that they think the high end-business won't show much growth, and they are feeling a lot more competition and price pressure there. Al explained that since there are more competitors at the high end, computer-makers are getting two or three bids now before buying. To me, this means that next quarter we should see further reductions in revenue on the high end, and that is exactly what made them miss this quarter. So at least in the short term, I think it is possible for Seagate to have a net loss next quarter, without any one-time charges." (yet management expects one time charges, it can get worse) Excerpts from the press release on the quarters loss(Bolding and underlines added): "The shortfall in both revenue and pro forma fully diluted net income per share was due primarily to intense pricing pressure during the quarter and weakness in demand for the Company's high performance products." "The Company is currently reviewing its operations worldwide and is contemplating actions which, if determined to be necessary, would result in restructuring and other one-time charges in the current or subsequent quarters. Although the consideration of any such actions has not been finalized and several are in a preliminary stage, any such charges, if required, could range from approximately $50 million to approximately $100 million." "Seagate undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof." For the full press release go to: seagate.com q1fy98.shtml at www.seagate.com Listen to what management is saying. Not only was the restructuring mentioned in the press release it was reemphasized in the conference call. This displays an indication that the company deems it necessary and has made this determination to restructure. When will the restructuring impact and the magnitude of the restructuring impact be felt (realized and recognized)? Will the cost of the restructuring result in a range of $50 to $100 million or exceed it? Here's another idea did management already make the decision to restructure, but because the decision was not finalized there was no accounting or SEC requirement (this falls under contingencies) to recognize the charge in the October 3, 1997 quarter? Did management decide to smooth out the bad news over a few quarters and do they have the flexibility? Recording contingencies can be very flexible, but only to the point where they are no longer contigent. Eventually they are realized and management is warning. Listen to what management is saying. Seagate made no pre-announcement of the bad news for the October 3, 1997 quarter. Will they make a pre-announcement for the upcoming quarter? Based on their communications or lack thereof, does this information (which is not the only factors to consider when making an investment) result in agressive or conservative pricing in the market. Listen to what management is saying. Look at what is happening to WDC and QNTM. If they are feeling a squeeze on the bottom line in the DD sector, due to competition, demand and pricing pressures, will SEG not feel the same squeeze, are they not subject to the same or similar factors and forces? Are WDC and QNTM the only ones subject to the intense pricing pressures and certain weaknesses in demand? SEG management states that they are subject to the intense pricing pressures and certain weaknesses in demand. Should investors disagree with management on this point?

To: Certafied who wrote (4040)	11/8/1997 12:07:00 PM
From: Sam	Read Replies (2) \| Respond to of 7841

Jeff, "Why shouldn't SEG fall to a PE of ~15 resulting in a price of ~$17? Has the market over-reacted to WDC and QNTM? Is the market artifically over-valuing SEG?" The "market" is assuming that Seagate's recent (and project for the next quarter or two) earnings are artificially low. That is, their earnings power given their asset base is far in excess of what is coming down now. Therefore, "they" ("it", whatever) are giving for the moment the benefit of doubt to SEG, assuming that once this blows over, their earnings will rebound sharply. If you disagree with that assessment, you should short it. It may well go down still more before it goes back up. But, IMO, these are pretty close to fire sale prices for this company (mid 20s, that is)--I still believe that the stock will at least triple from these levels over the next 2-3 years. However, they have certainly traded at lower valuation levels than these in the past, and probably will do so again over the next few months. Sentiment is heavily negative toward the drive stocks. Will continue to be so for awhile, probably for the next couple of months at any rate. Visibility beyond that is poor. But, unless you believe that this industry will become another DRAM disaster, that is the best time to buy for great long term capital gains. It is time to revive the "Buy whem blood is on the streets" thread.