Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Stitch who wrote (1979)	1/1/1998 11:04:00 PM
From: Gus	Read Replies (3) \| Respond to of 9256

And a very animated agreement it is, Stitch. I don't think our positions are all that far apart. The curious thing about the movement towards the sub-$1000 PCs is that it was orginally conceived of as the best way to increase the penetration rate of PCs to approximate that of the following consumer electronics items (with estimated price ranges): Color TVs* - ~98% = $99 to $5000+ Stereo* - ~95% = $49 to $3000 VCRs* - ~75% = $99 to $4000+ Camcorders* - ~60% = $199 to 5000+ PCs - ~45% = $700 to $3000+ Cable TV - ~65% = $30-50/month Internet Access - ??? = $10-30/month * A recent Frost & Sullivan study estimates the 1997 audio/video consumer electronics industry at about $165 Billion. The analysts who have been following this trend closely are divided as to whether the cheap PCs are cannibalizing the sales of the higher end PCs or whether the cheap PCs are expanding the market. For the first 7 or 8 months of 1997, the cheap PCs - $1500 and below -- were clearly cannibalizing the high-end PC segment, particularly the $1500-$2000 segment, so much so that the box makers were dragging down their $2000-$2500 configurations to shore up this category. The last few months, however, there has been a pickup in the $1500-2500 segments. There is clearly a significant portion of the PC installed base that is largely an upgrade market now so it remains to be seen if the two OS rollouts later this year -- Win98 in the June quarter and NT 5.0 in late 98 -- will be compelling enough to stimulate a major upgrade cycle. Until that happens, the PC food chain may have to live with the fact that unit growth is going to come from the the sub-$1500 PC segment. I agree with you that this represents both a challenge and an opportunity for the disk drive makers. Setting aside the issue of the supply and demand imbalance, the drive maker which can compete effectively across the board, from the desktop (1-5 platter EIDE DDs) to the enterprise (2-14 platter SCSI/FC DDs) has the advantage. On the desktop, WDC has cut back its build plan from 7.3-7.5 M units to 6.0-6.2 M units. QNTM is going to have a record December quarter in unit terms but it is going to cut back its build plan by 10% in the March quarter. SEG has closed one of its Irish assembly operation (est. charge $90 million) and I think it is in the process of rotating the temporary closure of some facilities in Asia, but I haven't seen any evidence that they have deviated from their volume-driven strategy which called for a build plan of 8.9 million units in the December quarter. Even that noted price-aggressor, Fujitsu, had reduced its build plan from around 1.3 million units to about 1.0 million units a month in August, heading into the strongest selling season of the year. IBM is registering some gains here but IBM is notorious for its inability to compete in the 'commodity' segments of the PC market. For example, whatever money IBM made in disk drives in 97 went right back to make up for the losses -- est. $300 to $400 million - of their $2.5 billion (est. 97 sales) consumer PC biz. Maxtor is really the vendor with the momentum and if the reports are true that RDRT can supply it with the 2.8 GB/platter MR heads in the March quarter and the 3.5 GB/platter MR heads in the June quarter -- a very aggressive transition, don't you think? -- then it stands to sustain that momentum for at least the next 4 quarters. March 1997 quarter - 1.3 million units June 1997 quarter - 1.7 million units (+31%) September 1997 quarter - 2.5 million units (+59%) December 1997 quarter - ~3.2-3.5 million units (+30-40%) Note: At its lowest point in 1996 when it was neck-deep in its restructuring, Maxtor was only shipping less than 1.0 million units a quarter!!! In the enterprise segment, SEG has redrawn its 'line in the sand' so many times it is no longer funny but clearly, IBM is the vendor making inroads here. Fujitsu and Hitachi both have captive mainframe and open system business anchoring their respective enterprise drive businesses so the big question for them is whether they can grab the volume in the desktop to allow them to achieve their economies of scale. You also have WDC and QNTM focusing on the NT market -- the small to mid-range server market which is the fastet growing segment. It's a crowded field, as you probably know better than I, so I'd be interested in hearing your thoughts about where consolidation is most likely to take place. Regards, Gus