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

To: ELH1006 who wrote (2016)	1/3/1998 6:13:00 PM
From: Stitch	Read Replies (1) \| Respond to of 9256

Eddie, I wish I could offer you more but I want to say very specifically that I have not analyzed this one closely. I do spend a lot of time trying to understand the DD sector and some recent conslusions will give you the source of my bearishness. The media sector has reached a state of overcapacity in excess of the other segments of the DD industry IMHO. I believe so much so that something has to give and I believe STMD is one of the weaker companys on the list. StorMedia has recently made a major acquisition without stating a clear strategic reason for doing so or offering a plan to go forward. The extent to which an acquisition of this size occupys the attention of management is a bit troublesome to me. Seems that their focus should be on remediation of existing assets. The history of STMD's customer list is telling: Going back a bit in time their efforts with Seagate on 2.5 inch platters obviously did not pay off. Concentration on Microplis, including the dedication of a plant in Singapore, and more recently announcements (October 22, 97)of new deals with Samsung and Western Digital all suggest to me they have done a really lousy job of picking their customer base. Their problems with Maxtor, in hindsight, are particularly unfortunate. On the plus side they are out front in terms of higher performance media as near as I can tell. The media supply qualification at Samsung and W-D are for products in the 2400 and 2500 Oersted class. But media is a very volume dependent commodity and neither of these programs are going to represent the volume required for a return on assets IMO. While the above comments are specific to STMD please also know that I am bearish on the media group in general. Even Maxtor is going vertical with the ramp up of MaxMedia. Its a dwindling market in a very competitive and overbuilt sector. I think it favors a scenario of 2 to 3 independent suppliers plus the internal groups. When Fuji Electric gets its facility in Kulim Malaysia on-line the overcapacity will worsen. Want a strategy? Sell STMD, take your losses, and go short another media supplier as a form of recovery. Sorry. Its bad news, I know. Good Luck in all your endeavors. Best, Stitch

To: ELH1006 who wrote (2016)	1/3/1998 7:48:00 PM
From: T Bowl	Respond to of 9256

I'll add a few comments on the merchant media market and some STMD specifics. STMDs customer base is in fact very bleak. Rev for the last few Qs($mil): Company MarQ97 JunQ97 SepQ97 IOM $4.8 --- --- WDC --- --- $2.2 Micropolis $7.2 $5.5 $4.4 SEG $19.1 $24.9 $15.5 These are the only ones big enough to be mentioned by STMD anyway. Micropolis rev is obviously gone. WDC will certainly not grow. And even SEG is struggling seriously this Q. I expect to see all of them drop this Q. I believe STMD says they need $30 of rev just to break even. Heck, even before these recent problems came up, the US based merchant media market did not look very strong. KMAG operating below capacity, STMD below. Look at the recent rev of the US based suppliers(KMAG STMD, HMTT): 1Q96 2Q96 3Q96 4Q96 1Q97 2Q97 3Q97 267.5 301.3 235.2 253.0 264.8 284.5 242.3 If you remove IOM and just include real DD makers it looks worse: 267.5 289.3 235.2 253.0 255.3 259.8 217.4 This is a shrinking business in a growing industry. It does not look pretty at all. It's only going to get worse in the near future. Of course they did announce recent qual's with Samsung and WDC, but I belive the downside risk is MUCH more than the upside potential FWIW, I tried to short STMD when the jumped to almost $4 after the Akashic announcement. (Not available according to ETRADE) I am short KMAG in order to protect my HMTT position. But every day I am getting less and less enthusiastic about their potential. todd