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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (2653)	12/5/1997 3:41:00 AM
From: Stewart Whitman	Read Replies (4) \| Respond to of 78579

But, is there anything that says the DD industry will cycle back in some reasonable fashion? It used to be that a typical home user would need more disk than came with a machine. Now with a fast CD-ROM and 2GB+ being the standard "shipped" configuration, the home user is rarely going to run out and buy a new disk drive at any time some. No need for me to put everything on my disk - large data files stay on the CD-ROM, or I better still, I pull info off the net. So then, you have the corporate users who are still buying high-end drives (e.g. 2 Gb+, SCSI). This is the area where QNTM and SEG compete and WDC doesn't. In my opinion, there is inevitably going to be a shift to thin clients in the corporate arena. Networks are getting faster, and maintenence costs of traditional clients are too expensive. That definitely cuts a lot of disk drives out. Sure I have my 200GB server - say 20 disks in an array - but I've eliminated say 300 disk drives on everyone's workstation (storing the same 300 copies of Windows!). Let's see - where I would've bought 300 drives, I now need only 20. How will that affect profit-margins and competition? The same argument goes for tape drives. Granted, these changes will occur slowly, but I think that the long-term outlook for this industry is really poor. These businesses are not really "cheap" for a low-margin, shrinking, commodity businesses - they have just come down from a point of being over-valued. All these stocks are still thought of as "technology" stocks. But, none of the companies actually has too much in the way of a defensible technology position with which other's cannot compete. I believe at some point that the industry will stablize, but I can't predict who will come out on top, what the margins will be, and what a reasonable industry P/E will be. Stew