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

To: Vanni Resta who wrote (5736)	11/26/1997 4:53:00 PM
From: Sam	Read Replies (3) \| Respond to of 9124

Vanni and Z, Z's analysis, IMO, is far more right than wrong. As Vanni says, "The business school books are littered with cases in which "locked up" or "hidden" value was released through a spin off or de-merger." All Z is saying, has been saying till he is "blue" in the face since about last April, is that once people see QNTM as a tape drive company with a disk drive business on the side, it will get a higher multiple. Yes, it will take awhile more. But it is starting to happen already. Sometime next year--possibly as early as the March quarter, almost certainly barring something very unexpected the June quarter, tape revenues will be running at about a $2 billion/year rate, and still growing at a 50-60% rate (QNTM's estimate--which may be conservative--from the last conference call--down from the current 100% rate YOY). At that point (if it doesn't happen before then), people will be even more willing than they are now to give QNTM a higher multiple, unless the drive business is a complete basket case, and is generating serious losses--something that I personally do NOT expect. As for why they don't get a higher multiple now, well, the market makes "mistakes" sometimes, even oftentimes. I have just bought a few hundred more shares at 27 1/2, both for my own account and for my daughter's account. At some point next year, it will be at least twice as high as it is today, unless the whole market generally or tech stocks in particular tank. Or so I think. Of course, I didn't think it would trade quite this low 2 months ago either--I have "lost" a lot of money by not selling. But so it goes. I don't need the money now, believe the stock will be back, and think that in a year or two I'll be happy with the investment. The question of what multiple to give a tape business is not entirely apt here. Two tape businesses that come to mind that aren't part of larger businesses are EXBT and STK. The former is losing market share to QNTM every day, and is rightfully depressed. They live off of their still larger but rapidly shrinking installed base. The latter has a strong presence in the mainframe backup business, but it isn't really comparable to QNTM's DLT business. In fact, I think that they sell DLT drives, if I'm not mistaken, in addition to IBM drives. They get a multiple between 20 and 30, but they aren't growing their revenues as quickly as DLT is, and don't have proprietary products of their own (caveat--I don't follow them much, so someone correct me there if I am wrong). What seems to be driving DLT (in good part, anyway) is the huge growth in mid-range networks and servers, especially NT systems. Apparently the word is out that if you buy NT, you also buy DLT to back it up. From everything I read, anyway, DLT is the only game in town once you get past a 5-10 gigabyte network, both in terms of durability and speed, and of course most networks will get past that range rather quickly. If no comparable or better competition to it is announced before next summer, that should continue for at least a few more years, at least if QNTM even comes close to meeting their goal of bringing out a 100 gig drive by CYQ1 '99.

To: Vanni Resta who wrote (5736)	11/27/1997 9:19:00 AM
From: Z Analyzer	Read Replies (1) \| Respond to of 9124

<<Look what happened to Lucent vs. ATT, just to mention one recent example. Lucent shot up after it was spun off, but ATT has lagged. >> As shareholders in both, do we really care if the DD business lags while DLT rockets. At least disk drives will have a positive valuation and will be evaluated on its own merits (ie people will factor in turnaround potential of high end instead of applying p/e to dd earnings as if they are peak earnings). <<BTW, that 30 multiple on the tape portion, that is accurate, right? I have no idea what it should be.>> It's anyone's guess, but since Goldman Sacks also says DLT is worth $50, they must use close to the same multiple. And remember, I'm only using Sept earnings. (Not 1999 earnings like Alex Brown would). By March Dlt earnings should be about 33% higher and so will DLT's value. It could be easy to miss the Quantum/DLT train. Just imagine what would happen the day Quantum announced taking positive action to realize shareholder value.