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

To: Sam who wrote (3812)	6/25/1998 1:22:00 PM
From: Mark Oliver	Read Replies (2) \| Respond to of 9256

<Perhaps this question should be posted on the Asian forum thread, but some of the same people are on both, so I'll ask it here: How can we be getting the news we are reading about the Asian liquidity crisis and yet simultaneously getting a large expansion in a sector which is already overbuilt? And how can the same companies which were prime culprits in overbuilding the DRAM sector be prime builders in this overbuilt, under-margined (if that is a word) sector? Who is lending them money for this expansion? Are their labor/production costs so much lower than SEG, QNTM and WDC that they can actually be making money when ASPs are deteriorating as rapidly as they have been over the past 6-9 months? Isn't there something wrong with this picture?> Perhaps another interesting question which ties into this would be how much does it really cost to put in new capacity, and how long does it take to get on line? I'm thinking about drive assembly, not heads or media. There was an interesting figure given by Mr Geenan. 80+/-% a HDD cost is materials. So, how much is the cost of plant and equipment, and labor? With a semiconductor fab, it seems like a much greater task to get a fab up and running well. Still, the lead time from ground breaking to production is nearing one year while this time might have been 2 to 3 years not that long ago. This is still a very capital intensive project, and the risks of going to a greenfield site are high. So, how does that compare to making a HDD? Perhaps the task of geting a new plant going for Fujitsu is not that high. They certainly have been firing on all cylinders. Geenan clearly said Fujitsu had made all the right moves and was looking like it would be a top 3 player in the future. Based on track record, you might ask why anyone would invest in Seagate, not Maxtor or Fujitsu. Regards, Mark

To: Sam who wrote (3812)	6/25/1998 6:37:00 PM
From: Stitch	Respond to of 9256

Sam, Fujitsu is indeed expanding when all else is contracting including the spending power of their yen. But isn't it just the same behavior we have always seen from large Japanese concerns? The king is market share all else be damned? It is the equivalent of the greater japan Inc. clinging to the view that they must "export" their way out of their economic shambles. However, Fujitsu can probably pull this off. We may end up with only three DD suppliers someday. Fujitsu, IBM, and Seagate. But for now, Fujitsu is till only number 6 in actual unit share and they have a long way to go IMO. By the way, Fujitsu is in no need of borrowing cash. As the world's second largest supplier of IT they have plenty. I visited their plant in the Philippines not too long ago. It is the world's first, as far as I know, that will have all major process steps on the same campus. Heads, Head stacks, media, drive production all within the same fenced perimeter. Amazing stuff. Best, Stitch

To: Sam who wrote (3812)	6/25/1998 6:40:00 PM
From: Frodo Baxter	Respond to of 9256

Sam, how many times do you want me to repeat this to you? SEG and WDC are not doing too well because they fell off the areal density curve. Imagine how Intel would be doing right now if they said, "Oops. Yeah, we ran into some technical difficulties, so this year, no new processors with >300Mhz." Do you think AMD's business conditions would improve because of this? Moore's Law is the backbone of the tech industry. Those that ignore it will be replaced by those who worship at its altar. You flail around incessantly about how Fujitsu and Maxtor gets their money. Well, Fujitsu is a conglomerate, so they get it from their parent, like IBM. Maxtor's financings are fully detailed in all their SEC filings, no matter how many times you claim otherwise. They get some from convertible debt issued eons ago, some from Hyundai, some from Citibank bank debt, and some from factored accounts receivables sold to Citibank. Now that I answered your questions, can you answer a couple of mine? How about why Shugart and Haggerty are still around? With their underperformance both financially and operationally, shouldn't their heads roll? Isn't this laissez-faire America, where we reward performance? And what sort of idiot bought into the unprecedented Seagate $700mln corporate bond offering, rather than the conventional convertible (junk) issues? Or Western's ridiculous $460mln covertible zeros? How well do you think Dell, Gateway, Compaq, and HP would do if the second-tier players were eating the top-tier's lunch?