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To: still learning who wrote (5306)	7/24/1998 1:31:00 PM
From: Stitch	Respond to of 7841

Still Learning; <<FWIW I think QNTM has held up better than SEG because* they weren't vertically integrated >>* You forgot to mention their head plant and the 3700 people they employ to try to make heads. Its not like they aren't trying. But you make it sound like a brilliant strategy. <<But it begs the question, are you free to take a better view of technologies (as QNTM did in buying and nurturing DLT from DEC) when you've decided to get out of the mfg game?>> Sorry boyo. QNTM fought long and hard in the negotiations to have the valuation of that product line zeroed. Even said they didn't want it. But DEC held firm to the position that it was all or nothing. Thems the facts. QNTM's "freedom" turned out to be first of all stupid...and second of all very fortunate. BTW...I thought QNTM was right and that the DLT was a pig. BTWDIK Best, Stitch

To: still learning who wrote (5306)	7/25/1998 7:55:00 AM
From: Gus	Respond to of 7841

SL, Aren't you the same guy that was calling for Shugart's head? Yawn. Bad memory. I think QNTM has held up better than SEG because* they weren't vertically integrated (and of course because of DLT)* Say it ain't so, Joe Blow. You're not saying that QNTM's disk drive biz is doing well because of a lucrative tape drive biz now are you? LOL. Let's take a closer look at QNTM's disk drive biz, shall we? 1) Heads - After running out of ways to lose money in head manufacturing, QNTM finally figured out that one sure way to lose less money is to sell 51% of the sucker to its exclusive contract manufacturer. Things that make you go tsk, tsk tsk. 2) Enterprise - Again, after running out of ways to lose money in the high-end segment, QNTM finally figured out that, gee, if they make less of these money-losing suckers, they'd lose less money. The record is quite unambiguous on this one. After all these years, QNTM has never quite figured out how to make the high performance disk drives that the customers want. If I am not mistaken, QNTM's share of the high-end in fiscal 97 remained at 9%, this after dumping big time during the summer, christmas, and after-christmas. 3) Desktop - QNTM has the largest market share of what is currently the most unprofitable part of the disk drive business. About a quarter of its desktop revenues come from the slowpoke-y Bigfoot line of 5.25 inch drives. There are at least three 3.5 inch programs that will be targeting this part of QNTM's lineup this christmas. Whatever happened to that disk drive maker that tried to stay with a trailing edge technology for too long? Have you taken a look at industry projections? What does the fact that WDC and QNTM are projected to have the steepest drop in market share this year tell you? Rhetorical. Heck, since we're here, let's look at DLT too. This biz has been capacity constrained 2 of the past 5 quarters. I'm being persuaded that margins may have peaked already. With some major and tricky transitions ahead and the competition intensifying (read: margin squeeze), it's best if you scale down your expectations here. QNTM missed the window of opportunity they had (when the biz trends were heading up) to monetize this seriously undervalued part of the biz. They could have used that crisp DLT stock as currency to buy more ATLPAs to shore up their margins and move away from their dependence on a single recording format when the clear trend is towards mixed-media. Instead, they have to make do with a funky wad of its own depreciating disk drive stock. This at the frontend of what may be a multi-year down cycle. Bungled opportunity. We are talking about the same QNTM, are we? gg Seriously, you want to take a look at the way Intel is churning out decent but not spectacular first gen graphic chips out of fully depreciated production lines to appreciate the kind of pricing power that control over manufacturing brings. That is not too much different from the scale economics implicit in SEG's value class roadmap which uses mature components. Conversely, you want to take a look at WDC's rather spectacular fall from grace to appreciate the downside of a fabless model. I don't know if you've noticed but some of the key U.S. suppliers of components to the virtually integrated players are teetering on the edge of the financial abyss. Best of luck. Gus P.S. Your point about "...being free to take a better view of other technologies." SEG is the only drive maker that I know of that uses fluid bearing motors (a mix of internal and Japanese suppliers) and dual stripe MR heads (from Headway, currently its largest outside supplier of recording heads). The stubborn myth is that vertical integration gets in the way of the use of outside technologies. The facts tell you otherwise.