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

To: Stitch who wrote (30)	11/8/1998 11:29:00 PM
From: Carl R.	Read Replies (2) \| Respond to of 1989

If you are developing your own heads, it can be an advantage or disadvantage depending on how good a job you are doing. For example when IBM pulled ahead in the MR conversion its vertical integration and head manufacturing capability became a weapon that it used to increase market share. At the same time, because SEG's head conversion to MR was behind, their vertical integration was a burden. Thus vertical integration is neither inherently good or bad, but simply an operating choice. If suppliers are better at a task than you are in house, outsourcing makes sense. But if part of your operating advantage comes from an area, it should be retained. The same is true if you aren't confident of the supplier's ability to remain competitive long term. As a comparison area, look at PCs. Dell used to make its own motherboards, but elected to outsource to INTC. It hasn't hurt them because DELL designed motherboards were not anything special and conveyed no particular advantage to DELL, and because INTC makes a decent motherboard. Carl