Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Arthur Radley who wrote (5209)	7/13/1998 12:22:00 AM
From: DJBEINO	Read Replies (1) \| Respond to of 7841

Weak PC Demand Amplified Disk-Drive Makers' Woes In 2nd Quarter Friday, July 10, 1998 NEW YORK -(Dow Jones)- The disk-drive industry's recent problems of oversupply, pricing wars and intense competition continued in the second quarter, amid weakened demand for personal-computer components. The big U.S. players - Seagate Technology Inc. (SEG), Quantum Corp. (QNTM) and Western Digital Corp. (WDC) - all are expected to post large earnings declines from their year-ago levels. Western Digital already has warned investors it will post an operating loss of more than $100 million, wider than had been expected, for its June-ended fiscal fourth quarter. In a sign that their may be light at the end of the tunnel, Seagate and Quantum could reverse two-straight quarters of losses, though the numbers still will be well short of year-ago results. The disk-drive industry has been plagued in recent quarters by weak demand, especially in Asia, and an industry glut of the computer storage devices. Some disk-drive makers have cut production and laid off some workers in an attempt to stem damages. In addition, the longtime leaders are fighting increased competition from International Business Machines Corp. (IBM), Maxtor Corp., Japan's Fujitsu Ltd. and South Korea's Samsung Group. Making the already tough landscape even worse was a brutal inventory correction in the PC industry, which started early in the first quarter and continued into the second. Compaq Computer Corp., the world's leading PC maker, idled its U.S. plant for two weeks in April to level out its inventories. IBM and Hewlett-Packard Co. also cut back on PC production, analysts said. "Clearly, we saw the continuing impact of the inventory correction, when we had three of the big four computer makers either reducing their build plans or their channel inventories," said Bear Stearns & Co. analyst Andrew Neff. Todd Bakar, an analyst at Hambrecht & Quist Inc., estimates that Seagate earned 10 cents a share in its fiscal fourth quarter ended in June. The Scotts Valley, Calif.-based company earned 61 cents a diluted share, excluding charges, in the year-ago quarter. Bakar said Seagate's cost-cutting measures, which included 15,000 layoffs, have helped its performance. The company also seems to have improved its high-end drive business, a market where its dominance has eroded in the last year. Joel Pitt, an analyst at Deutsche Morgan Grenfell, said Quantum may have lost money in the competitive desktop-PC drive business. But the Milpitas, Calif.-based company may be helped by its move to diversify into the market for backup computer tape drives. Quantum recently placed a big bet that this strategy will pay off, agreeing to buy ATL Products Inc., a maker of Digital Linear Tape systems, for about $300 million worth of stock. Quantum's version of DLT has become something close to a standard for backing up computer systems. But Seagate, IBM and Hewlett-Packard recently joined forces and unveiled a DLT technological blueprint in an attempt to break Quantum's hold on the market. Pitt says Quantum probably saw "moderate improvement" in its tape business. Overall, he estimates that Quantum earned a penny a share in its fiscal first quarter, compared with 61 cents a diluted share a year ago. Bear Stearns's Neff is expecting Western Digital to record a loss of about $1.30 a share for its fiscal fourth quarter. The Irvine, Calif.-based company earned 95 cents a share in the year-ago period. In its warning last month, the company said there are still too many storage drives in the distribution channel, despite reductions in finished-goods inventory among industry leaders in the last quarter. These conditions caused a further acceleration of pricing pressure on desktop hard drives. Analysts continue to be cautious about recommending shares of the disk-drive companies. Bakar said he expects a "slow gradual recovery, not the sharp recovery we've seen" from the industry in the past. Amid the increased competition, Bakar said investors "need to look at who's capable of achieving high volumes, low costs with great customer service."