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

To: Tom Simpson who wrote (3063)	5/5/1998 7:35:00 AM
From: CPAMarty	Read Replies (1) \| Respond to of 5058

from Yahoo Look at the Big Picture (Part I) Romandacil_II May 5 1998 12:04AM EDTBefore you get too depressed about the movement of this stock, think, instead, of the opportunity (at least if you're not maxed out and have left some cash on the sidelines). You should realize that any accumulation at these levels is an excellent buy, even for the short term of one quarter or so. Longer term, this stock easily breaks your buy of $17. Possibly with next Q's numbers. Here's why: 1. First of all, RDRT is way ahead of APM in MR technology. The excerpt from the Fool's Daily Trouble report on RDRT shows that 5 customers have qualified them for 2.8G heads. That's five more than APM. it's quite possible that APM customers will be turning to RDRT until APM gets their products qualified, which looks to be some time off, yet. And one of RDRT's customers is Maxtor which has been eating WDC for lunch. 2. Read again the IBM/WDC announcement posted below. The agreement is a letter of INTENT and has not been finalized. Rest assured that WDC is only doing this to stay up with the pack in case IBM's technology is the only game in town for awhile. They will not desert RDRT once competing product becomes available. (Remember, IBM makes disk drives and WDC is, in the end, getting in bed with a competitor which they won't do given a choice). In addition, drives based on IBM technology won't be available (if the agreement is consumated) until 1st HALF of 1999 - translated June '99 in techspeak - and will be expensive!!! Where do you think all the drives are coming from until then? Plus, with over 50% of their sales coming from MR, these assemblies are higher margin than the old inductive thin film ones. The major woes of APM in not ramping their MR as quickly as did RDRT will cushion RDRT throughout the year. Plus, they've gotten most of their huge expense writeoffs out of the way already. Several reports I've read cite the DD industry as being quite robust and profitable when you remove the obsolete lower capacity drives from the equation (and inventory), so don't throw out the baby with the bathwater. 3. Because of all this, the intelligent investor should look for a divergence between APM and RDRT after next quarter's numbers are announced. Right now they move in lockstep, but this is unjustified. 4. A final security blanket you can find in the balance sheet numbers. At a share price of 12 1/4: Price/Sales: 0.55 Price/Book: 1.30 Cash: $4.70/sh Even with $95 million less in the revenue for last quarter vs. Q2 '97, these numbers are extremely good for a company as well established as RDRT. They've got plenty of cash to ride out the tough times. For the quarter ending last December, they posted sales as large as the previoius year. Subsequent quarters should show a lot of improvement as inventory in lower end drives have been written off or unloaded, and newer drives are being shipped full bore. The PC industry is still GROWING, not contracting, and every one of those boxes has to have a drive in it. So take heart and show a little patience. Companies have to go through this kind of trauma occasionally to let you in at a bargain price. Remember IBM 4-odd years ago? The death of the mainframe, BILLIONS in losses and writeoffs, and a split-adjusted price of $20. Where are they now? $115? You couldn't have made that kind of return without the pain and pessimism that came with the stock at the time of that $20 purchase. The excerpts I cited above, I include in the next posting as they make this one too long. Hope this rambling help you sleep better at night! it also helps to quit looking at the ticker every 2 hours! - R ÿ