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To: Frodo Baxter who wrote (7378)	2/21/1998 4:53:00 PM
From: Hungry Investor	Read Replies (2) \| Respond to of 9124

Lawrence, Just to add in a little... I think there are merits to both of what you and Stitch are saying (how diplomatic of me). Stitch's example of IBM might be a great one (except noone knows the real numbers). However I must agree to some extent that the use of a vertically integrated system often results in poor performance due to ineffective communications (everyone is operating as there own profit center) and ineffective coordination (everyone wants to be the boss). If the integrated system is not managed closely (more costs), then the whole may not be cost effective, work well, or provide for rapid product development. I believe that you actually havefar greater control over outside companies than you do under most veritcally arranged companies. I have seen several companies go to some sort of vertical integration, only to do an overall cost and flexibility analysis and dump the whole thing. I wonder why outsourcing is so popular? Do what you do best and buy the rest. My 2 cents, Scott.

To: Frodo Baxter who wrote (7378)	2/21/1998 7:47:00 PM
From: Stitch	Read Replies (2) \| Respond to of 9124

Lawrence, You are correct. My use of gross margins was very casual in that post. But the general emphasis of my statement, I believe, still holds true. All I am trying to say is that the real economic and technological rubber meets the road in heads and media. How about if we compare operating margins of Komag and Western-Digital at the height of their output and capital spending , say, during the first two quarters of 1997? I have not done the exercise but if you agree that would be an interesting comparison I will. best, Stitch