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Technology Stocks : SYQUEST -- Ignore unavailable to you. Want to Upgrade?

To: Andrew Shih who wrote (5631)	2/22/1998 3:15:00 AM
From: Joon Song	Read Replies (2) \| Respond to of 7685

I've never seen an actual SparQ or EZFlyer so I'm just speculating. But isn't the SparQ just a higher capacity EZFlyer. Both use single platter cartridges, so both have a single set of heads. SyQuest simply takes the EZFlyer design, double the number of tracks, double the number of sectors per track, and now you have a SparQ. Would this type of retooling create that much startup cost? I think it would likely be fairly small (low single millions at the very most). About a month before SyQuest came out with their most recent quarterly report, I went looking through SyQuest's 1997 10-K and came to the conclusion that SyQuest was losing a significant amount of money on each drive. Their gross margins were close to break even only because they were still selling a significant amount of much higher margin cartridges for their legacy drives. Now that the legacy product revenue is drying up (down from ~50% during fiscal 1997 to 14% in the most recent quarter), the overall gross margin is beginning to more closely reflect the gross margin of their current products (SyJet, EZFlyer, and SparQ drives). As the legacy cartridge revenue continues to shrinks down to zero, I think SyQuest's gross margins could actually get worse in the coming quarter. (Consider they're already negative 25%, that would be quite a feat.) exchange2000.com exchange2000.com exchange2000.com Joon