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

To: Frodo Baxter who wrote (8594)	1/30/1998 11:10:00 AM
From: William T. Katz	Read Replies (1) \| Respond to of 11057

The Bearish view on Conf Call: Lawrence, I agree with your bearish view on the CC. The two biggest things I drew from the CC are: 1) They are losing cash in a big way. They refused to comment on when they would dip into their expanded $250 million credit line, but as you point out, cash will continue to be used due to negative cash flow for the next two quarters at least. Haggerty sees next qtr lower than current estimates and June qtr at high-end of loss [I interpreted that to mean it was at the more negative end of loss]. 2) There are no signs of when the disk drive industry will get back to normal. Inventories are still at "7 to 8 weeks" at this time, slightly down from 8 weeks at end of Dec. That should be down to 4 to 5 weeks ideally but no time frame was given when that might be corrected. Only historical guidelines of 1 to 3 quarters. But right now, it seems only the US manufacturers are cutting back and Seagate still has 1 (or 2?) million drives hanging around? I read that Maxtor and Fujitsu say business is great and they are still building new production units!!? WDC said that most of their in-house inventory are TFI drives and the write-off included cost protection for possible decreased pricing on those lower capacity drives. The main bullish points were their targeting of a profitable line of drives to serve the sub-$1000 computer market and their continued ramp up of enterprise drives. I totally agree that WDC does not control its own destiny. They must rely on the good graces of Maxtor and Fujitsu as well as QNTM/SEG. Frankly, I'm shocked that WDC price has moved up on this conf call, but at least WDC is better-off than APM. If WDC is hurting but at least is moving quickly to MR, what about APM which is even further behind the curve and will essentially lose all but a small flow of TFI by June? -Bill

To: Frodo Baxter who wrote (8594)	1/30/1998 1:04:00 PM
From: John Wang	Read Replies (2) \| Respond to of 11057

Lawrence: <<and $73 is cash in March and June.>> If you listened to the call, you would not think it pathetic. This will be used for the price protection to channel distributors in case HDD price dips at the same pace the next two quarters. This gives channel guaratee to continue to carry WD's products. From what I heard, this could be the charge they may only take for the next two quarters. Most likely, we may not see the same for March or June quarters. It is kind of dump all your garbage all at once. And, that is why the cash position is reduced to 108 mill. Another positive thing I heard is that their current channel inventor is at 7-8 weeks while SEG said 10 weeks (reduced from 14). This is by no means great. They wanted it to be 4-5 weeks. Of course, their tone in conf call was very low key. And, I sensed that they wanted to paint the worst picture including the gross margin. Last night, I thought about the whole call. My conclusion was that the stock would pop up today. This is not hindsight. John