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

To: Duker who wrote (555)	3/1/1999 6:18:00 AM
From: Duker	Respond to of 1989

Quantum Plans to Issue Tracking Stock, Signaling Growth Outside Disk Drives By DON CLARK Staff Reporter of THE WALL STREET JOURNAL Quantum Corp. Monday will announce plans to replace its common stock with two classes of tracking stock, reflecting the company's determination to expand outside the volatile disk-drive industry. The Milpitas, Calif.-based company said the new shares would be linked to two businesses -- the hard disks that have long been the company's mainstay, and a lucrative line of tape and disk systems that are higher up the data-storage industry's value chain. Quantum's proposal, which must be approved by shareholders, is believed to be the first use of tracking stock by a Silicon Valley technology company. It reflects the desire of a growing number of corporations to mine the stock-market value of individual business segments. The company's automated tape system line is already popular. With the Internet boosting demand for storing multimedia data, Quantum executives said they plan to begin developing new appliance-like storage systems for low-end applications, and new hybrid products that combine both tape and disk technologies in a single box. But the stock-market appeal of those efforts could be overshadowed by disk drives, a cyclical commodity whipsawed by computer demand and price wars. A typical boom-and-bust cycle nearly tripled Quantum's share price between September and mid-January; since then, the stock has sunk by 45%, reducing its market capitalization from $4.9 billion to $2.9 billion. Quantum shares closed Friday at $16.4375, off $1.625, in Nasdaq Stock Market trading amid new investor jitters about the personal-computer business. Assuming they approve the plan, Quantum's shareholders would receive one-half share of stock based on the hard disk business and one share of stock based on storage systems for each share of Quantum's existing stock. Issuing tracking stock is not as drastic a step as spinning off businesses entirely. The company, for example, plans to keep both operations under a single board of directors. "It's the perfect tool," said Michael A. Brown, Quantum's chairman and chief executive officer. "It recognizes that financial markets value different businesses differently." One wild card is a Clinton administration proposal that would treat grants of tracking stock as taxable events to shareholders. "If that bill were to be enacted we would have to reconsider our plans," said Rick Clemmer, Quantum's chief financial officer. Quantum's new market focus will face plenty of competition, analysts said, including International Business Machines Corp. and EMC Corp. at the high end, plus some new startups and products sold by big PC makers at the low end. Jim Porter, an industry analyst with the market research firm Disk/Trend Inc. in Los Altos, Calif., said some companies that buy Quantum's disk drives could hold up purchases if Quantum begins competing too aggressively with them in data-storage systems. "It remains to be seen if they will be sufficiently annoyed to get nasty about it," he said.

To: Duker who wrote (555)	3/1/1999 7:41:00 AM
From: William Epstein	Read Replies (1) \| Respond to of 1989

Duker; There is a debate of a fundamental nature going on on the other thread. Basically, Mark Oliver posted some very interesting thoughts concerning the future of the HDD industry as it is tied up with PC industry, as a whole. He showed that there is a case for arguing that HDD stocks should remain undervalued because profitability going forward will flatten out and perhaps disappear. He wonders if the recent return to normal inventories are really a blip in a long term glut of a cyclical commodity instead of the other way around. He could be right. However, I keep asking myself are we talking about an industry that makes only one product or does it make many products? Are we talking about all the companies in the HDD industry with very similar marketing, sales and financial structures? Are we talking about all companies that have the same focus? Of course not! Your post illustrates these questions. Seagate is in a very advantageous position to take advantage of the needs that will come from storage networking. SEG generally focuses on the high end of the market and its product development reflects that focus. So long as it keeps its more advanced technologies coming down the pipeline there will be a strong demand for its products. The length by which it can outdistance competitors will be reflected directly in its margins. People and companies will pay much more for advanced technology than they will for a commodity because they are not the same thing. A television is $300.00 at good 21" CRT is $1500.00. They are both televisions but not the same thing. The cost of manufacturing the CRT is not 5 times the cost of manufacturing a television but the price tag is. The difference is profit margin. PHOTOMAN