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Non-Tech : HMT TECHNOLOGY - UNDISCOVERED YET! -- Ignore unavailable to you. Want to Upgrade?

To: Dale Stempson who wrote (2110)	1/15/1999 6:44:00 AM
From: T Bowl	Respond to of 2253

Dale - There hasn't ever been a replay # for HMTT CCs. No mention specifically about how work is going with any customer during CC. Well, some small WDC desktop detials, but nothing new. Ron S. was out with "intestinal" problems so the call wasn't nearly as interesting or complete…(And I thought I was the only one this industry was making sick!) Some notes follow: - Customers > 10% were - Maxtor 35-40%, WDC, Samsung, IOM 15-20% - 4.3GB is currently the main product in factory. - working with 2 new potential customers. Hopefully you'll see announcement. - 7.6mil units shipped. - capacity was 10-12mil uits before took it down about 20% 8-10mil now. - taken assets down, but we are holding on to them… We could bring these back into service. They are still workable machines. - Units should see a slight increase over this Q. Believe new customers could impact this # at end of Q. - gained small amount of WDC desktop biz. This will grow in the MarQ. - had 24 prod lines + 2 not in service(and not deprec). Took out 7 of oldest lines(all still capable). Going fwd we will put new 2 into service. Effectively we will have shut down 5 lines once the 2 new ones start running. - 1700 full time emp. - 5.1ramping in small vol this Q, then mass in following Q{JunQ}. 6.5 possibly pulled in? Need to talk to our customers. that could be following soon. - we are only focusing on 95mm for now. - there is still some erosion. This is a comp environment. - our costs in the last 2 Q are higher due to under-utilization. Should get back to or better than we were. - have a $50mil credit we've never used. I don't see any need to dip into that. - priciple part of the charge($15.7mil) to take assets out of service. No intention given current conditions to put them back into service. They would be put back into service at current valuation which is not $0. - 4.3GB is primary prdct(60% 3.0 - 4.3GB+) todd

To: Dale Stempson who wrote (2110)	1/15/1999 7:28:00 AM
From: T Bowl	Read Replies (1) \| Respond to of 2253

Dale - Follows is a history(brief) of HMTT avg disk production "cost"(ACP). It illustrates well I believe the effect of underutilization of equipment utilization on disk cost. BTW, all estimates, no guarantees... 3Q96 4Q96 1Q97 2Q97 3Q97 4Q97 1Q98 2Q98 3Q98 4Q98 Cost 6.6ish 6.6ish 6.6ish 6.6ish 6.64 6.69 6.76 7.91 8.16 8.23 Obviously my records aren't exactly complete going back. The "6.6ish" estimate is one I heard from Todd Bakar H&Q on an HMTT CC last year. Util(%) 98 101 82 85 89 88 79 48 48 57 Those "estimates" are calculated from the total # of MDP lines they have times avg estimated output per quarter. The "older" MDPs were said to produce just under 400k disks/Q, the newer ones could produce 500k/Q. (Again, #s are from past HMTT CCs). Now, what is the real effect of the write-offs? Take down 7 lines(almost 3mil disks/Q), don't pay employees, power, lights, insurance AND deprec… They estimated sales for the MarQ should be basically flat or maybe up. Take that same 7.6mil disks and what will the "utilization" ne next year? Around 90%. So, which way would you expect costs to go? They mentioned in the CC that they do plan on bringing costs "lower" than before… How? Simple! It used to cost them an avg of around 25cents per disk for deprec costs assoc with the equipment. And they've got 7 lines ready to start spitting out disks with basically no deprec cost in the future. Magic? No. Just twiddling. The write-offs are an acctd gimmick IMO. However, that seems to be how business is done in the world, especially in the DD game, especially with the indys. The more disturbing trend however to me is the ASP history: ASP 11.59 11.11 10.34 10.68 10.77 10.71 10.04 9.46 9.50 9.18 Claims in 1997 were that they were able to offset falling ASPs of "older" media with the increased price of the "latest technology" high areal density media. Along came the crash of the DD(&media) market in 1998... And, well, you can see results. Until the capacity capability of the Indys(KMAG, HMTT, Trace, etc) comes back in line with demand, this trend will not change. Profits may temporarily get pumped up by financial wheenies twiddling with the books, but the fact is, there is still way too much capacity out there to warrant any real money making possibilities. Todd, the bear.