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Technology Stocks : Adaptec (ADPT) -- Ignore unavailable to you. Want to Upgrade?

To: Charlie Smith who wrote (869)	1/16/1998 7:50:00 AM
From: Starowl	Read Replies (1) \| Respond to of 5944

Charlie, I agree that the sub-K computer and its predecessor are not where you would find Adaptec's products, but it appears that the move toward sub-K by the large computer OEMs has brought prices down across the board, a trend abetted by the competition in the chip market among Intel, AMD, and Cyrix. Disk drive manufacturers have been swept along with that pricing river, I think, to remain competitive. While the OEMs have been raking in the dough, their suppliers (AMD is an example)--actually their enablers--have suffered to some extent. Quantum is an example: techweb.com "The company blamed the higher-than-expected charges on price declines in the high-end hard disk drive market, which has forced the company to reduce inventory." If the high-end disk drive market hurt Quantum, Seagate, WD, it almost certainly affected Adaptec as well. The companies may have to lower prices to increase volume at lower margin. Just a guess. I'm no expert. Starowl

To: Charlie Smith who wrote (869)	1/16/1998 11:19:00 AM
From: The Philosopher	Respond to of 5944

<<What I don't yet understand is how a $1400 price point (down from $2000) for a typical corporate PC cuts into host adapter demand. $2000 machines normally don't have SCSI adapters to begin with, so how could lower prices hurt demand? >> Speculation, not based on fact: when a full function PC cost $2,500 and a SCSI computer cost $3,200, the difference for many business users was small enough to justify the higher level system. But when a full function Pentium is available at well under $2,000, the math changes, and people may go for lower end over higher end. I haven't seen the top tier of machines drop in price as much as the bottom tier, so the spread has increased. I put this out for discussion as a theory only--comments?

To: Charlie Smith who wrote (869)	1/16/1998 1:21:00 PM
From: Jim Switz	Read Replies (2) \| Respond to of 5944

Charlie, My big question at the moment is how a shortfall of maybe 10% in gross revenues (I'm guessing they were trying for $280M, and will get around $250M), would result in an earnings shortfall of 30% (40c vs. 56c previously expected). That 16 cents/share equates to about $18M in net operating earnings. Now, if the revenue falls $30M, how could the net after-tax earnings fall $18M? Even if ALL the falloff in revenue was hi-margin PCI SCSI boards, there's no way they'd have 60% after-tax margins on those products. (I'm ignoring the one-time accounting charges they've also pre-announced.) Something's weird here, if my math is close to correct. I'm wondering if their cost structure has temporarily gotten too high. About a year ago, Dec. '96, they reported revenues about the same ($252M), yet net earnings were 46 cents. Now we're looking for about 40 cents on the high side. And, FYI, the stock was valued at about $40 back then as well, no doubt on expectations of growth. Maybe you can learn something to help answer this question during the Tues. conference call. Of course, I'm hoping the company's conservative reporting stance has caused the worst-possible hammering in the short term, that things won't be quite so bad as anticipated and that the stock will recover into the 30s in a month or so. Nice to dream about, anyway. What a week it's been. Jim