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

To: CPAMarty who wrote (4426)	12/18/1998 6:33:00 PM
From: Stitch	Read Replies (3) \| Respond to of 5058

Marty, Gillian Munson's (Morgan,et al) comments on the PC/Peripherals sector in general and RDRT in particular: MORGAN STANLEY DEAN WITTER PC Hardware & Peripherals (I/CPR): The Wrap-Up: Fourth Quarter Preview Commentary ______________________________________________________________________ The Peripherals Wrap Up is a publication of the Morgan Stanley Dean Witter PC Hardware/Peripherals Group. KEY POINTS - Reporting season is drawing near and PC Hardware vendors have slipped into their quiet periods for the most part. - In the PC market, solid demand trends enjoyed throughout CQ4 continued in December and we expect CQ4 results to be good. We are still seeing shortages of some products though availability is improving. - In the disk drive market, we hear that gray market activity has been limited in CQ4 - typically this is a somewhat good sign for pricing generally, (though it is still competitive) and a better sign for PC sell-through. - Disk drive vendors have begun to release information about products slated for spring of 1999. The specs indicate that there could be some market share shifting in 1999 - but it is still too early to tell. Still, competition is a huge issue in this space. - We think that the entire PC supply chain is feeling pretty good right now because demand has been up seasonally vs. very conservative forecasts set in the fall when there was a lot more market instability (both the PC market and the stock market). - We believe that this enthusiasm will roll into early C1999 as the delta between demand and supply will create a bit of a backlog entering the new year. In fact, though core demand could start to fall seasonally, shipments by the industry could look flattish to slightly down Q/Q entering CQ1 as compared to a typical decline of roughly 10% Q/Q. Read-Rite (Neutral, $14): Our CQ4:98E EPS estimate for RDRT is ($0.11) (down from $0.02 in CQ4:97) on $197MM in revenue (down 25% Y/Y and up 12% Q/Q), gross margin of 12% (up from (1.1)% in CQ3), and for operating expenses to be 15.2% of revenue (down from 17.1% in CQ3). The First Call mean estimate is ($0.17). - Our contacts in the disk drive industry indicate that Read-Rite had a strong quarter with improved customer positioning and an improving market generally. - We continue to watch the IBM/Western Digital relationship closely, as roughly 20-30% of Read-Rite's total sales could be at risk if this agreement starts to cover a large piece of Western Digital's volume. - We think there could be a little upside for Read-Rite from current CQ4 EPS estimates. - Read-Rite is currently planning to report on January 20, 1999.