>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.
If you don't have the numbers at your disposal, it's a cumbersome
endeavor to pluck out the useful info. I had half the numbers, but
spent more time than I expected pulling together the KMAG info.
Here's the executive summary:
Q3 96 Q4 96 Q1 97 Q2 97 Q3 97 Q4 97 Average
--------- --------- --------- --------- --------- --------- ---------
WDC GM 12.8% 14.6% 16.9% 17.5% 14.8% -5.7% 11.8%
OM 4.1% 6.4% 8.6% 9.3% 6.6% -15.2% 3.3%
Inc 32,878 64,229 82,595 87,894 62,707 (145,183) 30,853
D&A 14,998 13,325 18,045 17,117 21,960 25,425 18,478
CapEx (48,984) (20,582) (35,794) (50,598) (63,034) (48,757) (44,625)
Free cash flow (1,108) 56,972 64,846 54,413 21,633 (168,515) 4,707
KMAG GM 24.0% 11.7% 23.5% 20.4% 0.2% 11.6% 15.2%
OM 12.9% 2.7% 10.3% 9.6% -53.2% -1.5% -3.2%
Inc 16,498 8,412 17,799 11,677 (52,748) 1,169 468
D&A 22,752 26,008 28,576 30,596 36,863 33,000 29,633
CapEx (93,813) (141,863) (67,560) (57,638) (35,778) (38,000) (72,442)
Free cash flow (54,563) (107,443) (21,185) (15,365) (51,663) (3,831) (42,342)
As you can see, being a component supplier is easy... if you got
green stuff to burn. KMAG has already bit down hard on their line of
credit ($245 million out of $345 available). After I did all this
stupid number crunching, I realized there was an easier way to prove
my point. Just pull up a five-year chart of the drive makers SEG QNTM
WDC and compare it to the food chain KMAG HMTT STMD RDRT APM. That
should put to rest any residual thoughts you have of the glories
(gories) of making heads and media. |
