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

To: Dennis R. Duke who wrote (3250)	5/20/1998 11:08:00 AM
From: stockbug	Read Replies (1) \| Respond to of 5058

Did someone post an 800 number for investor relations. If so would someone repost it.

To: Dennis R. Duke who wrote (3250)	5/21/1998 2:26:00 PM
From: William Wang	Read Replies (4) \| Respond to of 5058

Strong Buy from Smith Barney Analyst: DEAN/ROTHACHER (415) 951-1622 Recommendation: Strong Buy Current EPS: 9/99: 0.80E 9/98: 9/97: 1.85A --SUMMARY:--Read Rite Corporation--Computer Storage RDRT's shares have been falling in the past weeks to a level which we believe is overdone. There is no real "new news" that we are aware of impacting the stock. RDRT continues to press-on with its transition to MR, diligently working to push its MR percentage to 95% by the end of the year, is implementing operational efficiencies as a part of its efforts to drive down cycle times and improve its capacity utilization and inventory turns, and is taking the right steps to bolster its management and engineering pool. RDRT continues to be challenged by industry conditions, lower volumes, which hamper margins, and aggressive pricing; a newer concern is the potentially negative impact of the IBM/WDC announcement. We remain hopeful that RDRT will soon report new qualifications. --EARNINGS:----------------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 09/97 EPS $0.12A $0.48A $0.64A $0.61A $1.85A Previous 09/98 EPS $0.02A $(1.29)A $(0.46)E $(0.16)E $(1.89)E Current 09/98 EPS $0.02A $(1.29)A $(0.46)E $(0.16)E $(1.89)E Previous 09/99 EPS $0.11E $0.17E $0.21E $0.31E $0.80E Current 09/99 EPS $0.11E $0.17E $0.21E $0.31E $0.80E Previous 09/00 EPS $N/A $N/A $N/A $N/A $N/A Current 09/00 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: --FUNDAMENTALS:------------------------------------------------------------- Current Rank........:1-S Price 05/20/98......:$9.62 Prior Rank..........: Target Price........:$21.00 P/E 09/98...........:N/AX 52 Wk Price Range...:29.00 - 10.12 P/E 09/99...........:12.0X Proj. 5yr EPS Grth..:21.0% Return on Equity 97.:16.23% BookValue...........:$8.11 LT Debt-to-Capital..:N/A% Dividend............:$N/A Revenue 1998........:$895.90 mil Yield...............:N/A% Shares Outstanding..:48.69 mil Convertible.........:No Mkt. Capitalization.:$468.40 mil Hedge Clause(s).....: Comments............: --OPINION:------------------------------------------------------------------ RDRT's shares have been falling in the past weeks to a level which we believe is overdone. There is no real "new news" that we are aware of impacting the stock. POSITIVES - RDRT continues to: (1) press-on with its transition to MR, diligently working to push its MR percentage to 95% by the end of the year; (2) implement operational efficiencies as a part of its efforts to drive down cycle times and improve its capacity utilization and inventory turns; and (3) take the right steps/actions to bolster its management and engineering talent pool to position itself well for an industry turn. CHALLENGES - However, RDRT continues to be challenged by: (1) industry conditions; (2) lower volumes, which hamper margins; and (3) aggressive pricing. A newer concern is the potentially negative impact of the IBM/WDC announcement. WDC was a 45% customer to RDRT in the March quarter. We note that the combination will not likely have an impact in the near-term (through the end of the calendar year) upon RDRT in terms of ability to participate on WDC programs through the 3GB/platter capacity point, given the fact that the IBM/WDC relationship will be a calendar 1999 event (presuming the transaction closes). There are a number of variables that will determine RDRT's level of interaction with WD after that time that include (1) RDRT's ability to be competitive with technology and price and (2) the final terms of the agreement between IBM/WDC (there remain a number terms not yet finalized or disclosed). We expect that if RDRT executes, there will likely be a potential place for RDRT on WDC's supplier list for desktop programs; the IBM/WDC relationship does not preclude WDC qualifying alternate suppliers and is not applicable to WDC's ESG (Enterprise class) products or its programs targeted for the sub $1,000 PC market, which remains an opportunity for RDRT and others. We also note that WDC is "paying" for the technology in some way, which will likely pressure the WDC's gross margins. We believe that there will be a threshold point at which WDC, once firmly on track with its MR designs and expertise, will look for a balance of supply in order to relieve any margin pressure, potentially providing opportunities for RDRT and other head suppliers longer-term. OUTLOOK - RDRT is diligently working to qualify its MR technology for 2.8GB/platter programs with a number of disk drive manufacturers. We remain hopeful that RDRT will soon report new qualifications for capacities at that level or above and expect announcement/s or news within the next 30 days. Qualifications as a #1, #2, or #3 supplier on next generation products (RDRT was successfully qualified on many 2.1GB/platter programs which are still shipping in volume but will decline in coming months) will likely help to boost the company's financial viability in the near term and alleviate some of the fear, uncertainty and doubt among investors. We believe that RDRT will be well positioned operationally, functionally to benefit from a recovery in the disk drive market; we believe the drive sector is "bottoming" though we expect a "U" off the bottom in this cycle (will take longer and be complicated by a greater number of isses), rather than a "V" off the bottom which we saw in the prior cycle. Hence, we encourage investors to be discriminating in choice of investments and be wary of the high risk/reward nature of the group. We maintain our EPS estimates and rating on the shares. Salomon Smith Barney is a service mark of Smith Barney Inc. Smith Barney Inc. and Salomon Brothers Inc are affiliated but separately registered broker/dealers under common control of Salomon Smith Barney Holdings Inc. Salomon Brothers Inc and Salomon Smith Barney Holdings Inc. have been licensed to use the Salomon Smith Barney service mark. This report was produced jointly by Smith Barney Inc. and Salomon Brothers Inc. and/or their affiliates. * Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries and/or affiliates, usually make a market in the securities of this company. This publication has been jointly approved for Japanese regulatory purposes by offices of the Firm doing business in the regions of the contact persons listed on the cover page hereof. This publication has been jointly approved for distribution in the UK by Smith Barney Europe Limited and Salomon Brothers International Limited, which are regulated by the Securities and Futures Authority(SFA). The investments and services contained herein are not available to private customers in the United Kingdom. The research opinions of Smith Barney Inc. and/or Salomon Brothers Inc, including subsidiaries and/or affiliates, may differ from those of The Robinson-Humphrey Company, LLC, a wholly owned brokerage subsidiary of Smith Barney Inc. (c) Smith Barney Inc. and Salomon Brothers Inc, 1998. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution.