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Technology Stocks : Disk Drive Sector Discussion Forum -- Ignore unavailable to you. Want to Upgrade?

To: Frodo Baxter who wrote (2563)	2/25/1998 10:49:00 AM
From: Sam	Read Replies (1) \| Respond to of 9256

No, we investors in drive stocks like to turn gold into iron. See the following post on OXHP: exchange2000.com You'll love it. Has some relevance to DDs (especially Maxtor, I think, but you will probably think also SEG). Texas Pacific gets convertibles with a strike below today's market price, 8 and 9% interest, plus the strike can be *lowered* if the stock price is below 17.75 when they want to convert! Nice work if you can get it. Those guys turn iron--even badly rusting iron--into gold. Of course, they couldn't get OXHP's directors to give them puts on their stock, unless it was under the table. Those directors are really shrewd and tough negotiators. Here is an excerpt from the above post that is especially relevant to DD stocks: While the mailman's diatribe may seem a bit extreme, the heart of his argument is correct. The financial results announced today are stunning, staggering. No superlative can overstate the case. An insurance company can't be sure of its real earnings until well after the results are set, in effect, by the price of the policy vs. the future unknown costs to be incurred. Earnings in the short run are merely estimates of what the future may be. Insurance company managements have unusual leeway in being either aggressive or conservative in their assumptions. The results announced by Oxford today reveal that the whole thing has been a sham. Period. The whole time. Sure sure, they have a franchise, a network, a name, and thousands of people receive health care from the company. Great. But the whole thing has been perpetrated on a false notion: that the company was charging high enough premiums to earn a decent return on capital. Well, well, now we see how Oxford grew so darn fast. They underpriced their product. The charge taken today wipes out the ENTIRE COMPANY EARNINGS OVER THE LAST FOUR YEARS! THE COMPANY NEVER MADE ANY MONEY. Nice talking to ya. You or I could make a business grow if we could undercut our competitors on a price/ value proposition, especially if we could fib a little about how much we were losing, raise more equity capital, grow some more, and then sell a bunch of stock before fessing up to reality. (end excerpt)

To: Frodo Baxter who wrote (2563)	2/25/1998 12:38:00 PM
From: Bill Lin	Respond to of 9256

Would it be appropriate to use the Semiconductor Fab business as an analogy to the DD sector? The costs of Fab houses are increasing by about $500mm per year. The lastest 300mm 0.25um fab Intel is planning (or is it 0.18um?_) has an estimated cost of $1.5b to $2 b. This is up from a cost for merchant foundries of 8" wafers and 0.35um tech of $250mm. So the argument goes, size matters. The cost of capital required for innovation is increasing at a power of 2 every 3 years, just as the power of computing is doubled every 3 years. Average selling prices stay static. Volume increases through market growth is how revenues increase. When excess capacity hits the market, and average selling prices decrease, the industry profitability decreases. The DD sector is stuck with too much head/media unit volume capacity and is underfinanced for the next technological innovation (MR/GMR/opto-magnetic), and only the well capitalized players (IBM, Fujitsu, SEG) will survive the transition with momentum. ???? I'm guessing here...any comments? BL