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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Kurthend who wrote (1824)	12/16/1997 8:58:00 AM
From: Will Cunningham	Read Replies (1) \| Respond to of 9256

It is interesting to read in this forum that a consensus has formed around Maxtor and how much of a drag they must be on their parent. They have already made an MR transition. They are expanding and possibly taking share away from Western Digital at some OEMs. They are on track to complete their first profitable quarter. Interesting to note that Maxtor and Fujitsu are not planning to cut back on production. I found most of this information in a report by analyst Alexy and found it quite informative and revealing of what is happening in the industry. Headline: Data Storage: Highlights From Asia Trip Author: Kimberly Alexy, CFA 1 Date : 12/15/97 ************************************************************************* * In our recently completed Asia travels, we visited and toured companies in the data storage industry including: Western Digital, Seagate, Maxtor, and Read Rite. * In general, consensus among those polled indicates that it will take between 6-9 months for supply and demand to realign for desktop drives. * Interestingly, while Seagate, WD and Quantum's financial performance has weakened, Maxtor continues to track towards its first profitable quarter. We believe the company has made inroads at OEMs - potentially displacing WD in some accounts. * We continue to believe that pricing remains aggressive and that a recovery for HDD stocks will not occur until the environment shows signs of stabilizing. * We maintain that the worst is not yet over and that visibility remains weak. We expect that further earnings reductions over the near-term are certainly possible for all HDD vendors. We remain Neutral on the sector at his time. ************************************************************************* First, unlike its other primary HDD competitors, Maxtor is not scaling back on production. In fact, the company is struggling to meet demand and is tracking towards its first profitable quarter. At this time, the company makes only desktop drives and does not participate in either the notebook or enterprise space. Until recently, Maxtor was more focused on distribution channels and had limited OEM business. OEM mix, however, is now in excess of 50%. We believe Maxtor has made inroads with some strong OEM accounts such as Dell and Compaq - fueling OEM growth. While in the past, the company has had a spotty history of delivering leading edge, volume, time to market product, Maxtor now has hit in-volume sweet spot desktop product offerings with its 2.1GB/platter product line. The company is expected to ship approximately 3.2MM drives this quarter and is currently expanding its line to accommodate approx. 4MM drives/quarter. An additional manufacturing facility is expected to come on board next year in China to further expand capacity. We believe Maxtor has successfully gained market share due to its strong product portfolio, concentrated on high capacity drives. The company is expected to launch a 2.8GB program in March and a 3.5GB program in June/July. If the company continues to execute, we believe these scheduled product roll-outs will position the company competitively. Striking from this visit was the noticeable difference in the HDD outlook. Unlike its peers, Maxtor is tracking for improved fundamentals - and after many unprofitable quarters, the company is finally tracking towards its first profitable quarter. We believe the company's execution and time to market 2.1GB product offerings (competitively priced) have yielded some key OEM wins. It remains to be seen whether this trend is sustainable, but clearly Maxtor remains a key vendor to watch. While all primary HDD vendors (QNTM, SEG, WD) are scaling back on desktop drive capacity - others such as Maxtor and Fujitsu do not appear to be doing so.