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

To: Roader who wrote (6360)	12/10/1997 4:57:00 PM
From: Rational	Respond to of 9124

To all: As I said in my earlier post, SEG's announcement is very good news for the US DD makers (especially the efficient ones like QNTM), in a new Asian environment which is as follows: Asian companies (e.g., Fujistu, Maxtor) will face severe capital crunch and rising cost of capital because they are finding it hard to raise debt or equity in global markets. They have to depend on their banks who depend on IMF loans (18%) to fund operations. [Fujitsu will not face 18%, but will be under severe pressure from its creditors.] There will also be enormous governmental pressure to cut operations which are not profitable, after accounting for the new cost of capital which will wipe out all their future expected profits. American DD companies have hard currency at much lower cost of capital and will pay lower costs in Asian currency. The reason for why a company like Fujistu was "successful" in dumping here was because the cost of debt is less than 2% in Japan, as opposed to 7% here. This was a highly subsidised, highly leveraged game that Asian governments played for a long time to just see their banking systems collapse. Their banks invested in US Treasuries at 5.5% and stocks, while lending locally at very low rates. The low costs of capital will now be a dream in Asia. Maxtor and Fujitsu will likely (IMO) close/scale back their DD business or sell to SEG/QNTM/WDC. Such a thing has already happened to Micropolis. I do not have the time to explain more details of my logic for why the US DD companies will boom; but I am very happy with my investment. Yes, watch out for tech-stocks in general because the WS is not happy with earnings disappointments, but do not miss the ones that have already been beaten to death and are now heading towards a sangune environment. This is strictly my opinion and not an investment advice. Sankar On QNTM vs. SEG: QNTM has enormous flexibility to ask MKE to not produce more. MKE will (under the contract) absorb the cost for orders not placed due to market conditions. Restructuring the SEG's vertically integrated process has to be done the way SEG is doing now. I had argued about SEG's inefficiency that some here were not sure. Today SEG states about improving efficiency; SEG is not simply cutting costs. I would not be surprised if SEG begins to buy production facility somewhere like QNTM is doing. QNTM's business model can efficiently withstand tough business conditions. (Cf. the vita of QNTM CEO!)