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

To: Gottfried who wrote (4511)	9/26/1998 12:35:00 AM
From: La Traguhs	Read Replies (2) \| Respond to of 9256

GM et al., Maybe reality is finally setting in. The San Jose Business Journal's lead article headline reads (out this Friday), "Some Forecast Silicon Valley Downturn". That's the first time the BJ has reported that the boom we've had for the past 3 or so years could be coming to an end. The article cites a number of indicators pointing to a possible recession for the Silicon Valley for next year. The main ones are the "alarming" increase in vacant fabrication and assembly facilities and the significant decline in area IPOs. It would appear that the continued crummy earnings reports from the local disk drive, semiconductor and telecommunications industries are being taken seriously. My report from the "Wall Street Perspective" session at Diskcon. Summary: "a bunch of bearish analysts telling the industry to focus on margins not market share". A key point stressed by several analysts was - "we're losing money in a growing market - how come"? The session told me what to look for before investing back into disk drive stocks (I got out of most holdings in late July). Get back in when you see one the four public HDD companies change their business model to: a) Draw a line in the sand saying, "box builders - this is the price I need to make a profit - I can't keep working for free". b) Focus on margins not market share. c) Slow down the intercompany technical rivalry to force areal density increases at 60%/year at all costs and reduce R&D budgets inline with that theme. That means recognizing that in the high volume desktop segment, HDD capacity has significantly out paced demand and that capacity for capacities sake is hurting profits. Or put another way - focus on what the market needs. d) Focus on what you know and do best. The first HDD company that recognizes that they can't be all things to all market segments and focuses on the segment they know how to make money in, gets my investment. One analysts said "can you imagine the valuation that would occur with Quantum if they quit making HDDs and just made the very profitable DLT tape products". I would add, can you imagine the positive effect on Seagate if they got out of the desktop and focused on the profitable highend/enterprise and software businesses? My overall impression - now is not the time to be investing in HDD stocks. That must have been the feelings of many in the industry since, as one analysts noted, "last year the room was full. This year it's only half full". Regards, LT "the bear"!