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Technology Stocks : Western Digital (WDC) -- Ignore unavailable to you. Want to Upgrade?

To: Sung Chung who wrote (8309)	12/23/1997 11:48:00 AM
From: Sam	Read Replies (2) \| Respond to of 11057

Sung, A good post, but one reason why the component suppliers got hit first was that last spring, the perception was that the oversupply was more in the components, and not in the drive vendors. Media was clearly oversupplied, and heads were ominously headed toward that state, which put a lid on APM and RDRT (although both had/have transition issues as well, but that is another tale). SEG got hit first among the vendors because they derived most of their profits from enterprise drives, and were hit by the double whammy of going off allocation (then the inventory that had been built up while they were on allocation had to be worked off) and having more suppliers entering the market at the same time. Then WDC got hit because they were exposed on the low end where SEG and Fujitsu decided to regain/get market share with price, and finally QNTM got hit as the price reductions went up the density chain. These guys (the drive assemblers and the component suppliers) live in different, although obviously related, worlds, just as the drive vendors and the boxmakers live in different but related worlds. Box sales are a necessary but not sufficient condition for drive sales, as drive sales are for components. But there still may be an oversupply of drives, leading to poor margins and profits, even if box sales are robust. Same with components--there may be glut of components, even if the drive vendors are doing good business and making good money. No easy answers here. Although, frankly, I do think that the selling has been overdone, and buyers in here will make money in this sector in the ripeness of time. The problem is that visibility is so poor as to when that time might be that there is a buyers strike as well as end of the year issues exaberbating the decline. Buyers, though, will outperform the market over the next year or two, especially in QNTM, IMO. I'm not as sure about SEG or WDC, as they have other issues to work out, but it is more plausible than not. Good luck, and best wishes for the New Year to all, Sam