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To: Think4Yourself who wrote (10702)	12/6/1997 7:50:00 PM
From: Rational	Read Replies (1) \| Respond to of 12298

Ken: Your point "...APM is a much more efficient operation, or at least has been in the last twelve months. They made over 29 times more profit on less than half as much sales," is actually a well-known fact. There has been a factor of hype built into RDRT price since the false information -- that APM did not have the MR technology -- spread around in the wake of APM's proposal to merge with RDRT. APM price has fallen dramatically since then. Given that most fund managers are not well informed about technology and are prone to follow the herd, APM price has fallen much more than it should, while RDRT's price has simply responded to the DD sector price movements. On efficiency: APM: employs 8500; sales $495 mil; profits $100.3 mil RDRT employs 23,000; sales $1160 mil; profits $91 mil Obviously, APM has been more efficient. It must then be that there is a factor of hype built into RDRT price and an abnormal fear into APM's price, IMO. Sankar

To: Think4Yourself who wrote (10702)	12/6/1997 8:02:00 PM
From: Jonathan Bird	Read Replies (1) \| Respond to of 12298

Yahooo claims that in the last 12 months RDRT had NET income of 2.93 Million on sales of 1.16 Billion (EPS = 1.86) while APM made 96.1 Million on sales of 494.8 Million (EPS = 4.05). The figures I have from the companies respective earnings releases are: RDRT Sales = 1.16 Billion Net Income = 91 mil FY97 1.87 share fully diluted APM Sales = 494.8 Million Net Sales = 100.3 mil FY97 3.50 share fully diluted Your point is well taken about APM's greater efficiency. This is why Crimsan thought it would be a cool idea to merge with RDRT. He wanted to project APMs efficiency. I think that would have been good. But in the most recent Qtr: RDRT Sales = 318.2 Net Income = 30.5 F4Q97 .61 share APM Sales = 122.8 Net Sales = 16.3 F4Q97 .60 share The diference in efficiency is not as drastic here. But in the end all that will determine the share price is EPS going forward. Not efficiency. Jon Bird

To: Think4Yourself who wrote (10702)	12/8/1997 8:29:00 AM
From: T Bowl	Respond to of 12298

Ken - Sorry to have taken so long to get back to you. You said: <<my understanding from these numbers is that APM is a much more efficient operation>> True. APM had: 1) Higher GMs 2) Lower SG&A Expense % 3) Lower tax rate All of these have contributed to higher % profits. A good thing. I'll address each of these individually. All of these are MY OPINION ONLY. 1) Higher GMs Gross margin is dertermined effectively by ASP(avg selling price) and yield. Yield is (# good heads)/(# heads produced). This varies with process and type. A higher yield is ALWAYS the key to increased profits. I watch it closely. During the last few Qs, APMs GMs have been(%) DecQ9MarQ9JunQ9SepQ9DecQ9MarQ9JunQ9SepQ97 GM 24.8 29.2 24.2 29.7 38.3 38.4 32.1 26.7 You can see a good deal of variance. Wanna know why APM made $1+/Q in Dec and Mar Qs? (It was the high GMs. They will either have to increase rev Significantly or get back to the high GMs to do it again. I don't See either one happening in the near future.) This GM spread is a result of the Product mix, competition, market, # units, etc. Rev for the Qs was: Rev 94.7 86.7 74.0 89.3 121.6 126.3 124.1 122.8 I believe that part of the HUGE increase in rev at the end of 1996 was WDC. In early 1996, WDC pushed for TFI heads with undershoot reduction - I believe this feature reduces access time(?) RDRT at the time could not provide it and APM got the biz. I do not know why RDRT got behind, I've heard because they were focusing on MR, but in any case, APM did a good job and got the rev. RDRT lost a tremendous amount of money during those Qs... APM did a good job at the time. What makes me nervous about the current GMs is how quickly they have fallen. From 38.4% to 26.7% in 2 Qs. This is yield and ASP issues. Look back at their PRs and they talk about how important it is to improve yields on the newer products. It is obvious to me that they could not do this, the WDC 1.7GB pgm was cancelled. During the same time period, RDRTs GMs have gone from 22.1% to 22.4%. Why are the GMs lower? Is it MR fundamentally? Is it competition? I do not know. Will the APM GMs fall to around 22% and flatten? My gut says not, because yields always start low and improve with new products. During the RDRT CC in Sep they talked of how yields are improving with every MR product(1.3, 1.7, 2.1) So, it's not necessarily the density that is the problem. Seems the new MR technology was tough to master for them. In the end, I've seen APM talk about yield problems and RDRT talk about yield improvements. GMs at APM have been falling. 2) Lower SG&A? They ARE more efficient there. Lower sales cost %. 3) Lower tax rate. Anyone notice they only pay around 2 - 3% taxes. I'd imagine this is a result of previous losses that they are accting for. Brian or Badger, you ought to ask Crisman how long that will last. Once this grace period is over you can count on 15 - 30% off the top of your profits. <<So if you believe APM is overpriced, are you also shorting RDRT which is more expensive and less efficient?>> My bet is that APM was more efficient, but that has gone away. The TFI era is over, now they have to pay the MR Gods for the transition. Hope this answers your question. todd Ken -I've got all of the APM financial junk in an Excel97 spreadsheet. I'f be happy to send it to you so you don't have to collect it yourself. There is alot of other stuff like cash, R&D, misc, etc in it. It also allows you to change GM, rev etc and it will tell you future EPS given those changing parameters. Send me an email at TBowland@aol.com - your addr in not listed.