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

To: CPAMarty who wrote (5818)	3/10/1999 10:31:00 PM
From: Gottfried	Read Replies (2) \| Respond to of 9256

Marty/all, Smart Money today:"Slipped Disk" By Joshua Albertson Not nearly as thorough as your analysis, but worth a read. smartmoney.com FOR DISK-DRIVE makers, it's been a long, painful recovery. Actually, in recent months, it has often seemed more like a relapse. But reports on Wednesday from the Asia Computer Storage Conference in Singapore confirm that the healing process is probably working. Analysts predict 15% to 17% growth in the hard disk market in 1999. Longtime dogs during the technology boom of late 1997 and early 1998, stocks of rigid disk manufacturers like Seagate (SEG), Quantum (QNTM) and Western Digital (WDC) looked poised for a strong 1999. Inventory levels were back to normal, PC demand was rebounding and costs were under control. And for the first few weeks of '99, investors believed the story. A rally that began late last year lifted shares of all of the industry's major players. The enthusiasm waned in February and March, as investors wondered again whether they were paying too much for companies whose fortunes were tied directly to the up-and-down PC market. Yesterday's gains became today's overvaluation concerns. After topping out at 42 1/8 in January, Seagate has fallen back to 27 1/8. Quantum touched 28 on Jan.20 only to give back almost half of its value by late February. And even Western Digital broke out of its hibernation in the early winter, climbing to a 20 3/8 high in January, before falling back to sleep. Still, most analysts are not predicting further regression. "The industry is still definitely on the comeback trail," says Brian Goodstadt of Standard & Poor's Equity Group, "but I think people got a little optimistic that things were going to come back to normal." The problem, though, is that this is normal. Roller-coaster stock charts are par for the course. And as long as disk-drive makers peddle their commodity products to a fickle community of PC suppliers, that is not likely to change. In this sector, it makes sense to buy when it seems that things are at their worst, and then sell the minute the analysts turn optimistic. Meanwhile, as the disk-drive concerns struggle with the industry's ebbs and flows, not all storage players are struggling to convince investors of their worth. Enterprise storage concerns, namely EMC (EMC), somehow manage to remain above the fray. Shares of EMC have soared 35% so far in 1999, fresh off of a 274% gain in 1998. Network Appliance (NTAP) is up almost 200% during the last 12 months. And while Seagate and Quantum haven't been operating in the same market as their more profitable storage sisters, they might be headed in that direction. Analyst Eliot Glazer of Du Pasquier thinks that Seagate is doing an admirable job trying to smooth out the bumps of its traditional operations. "[Seagate has] increased its efforts in mass storage systems, going after EMC-type products," he says. Glazer estimates that mass storage systems make up about 15% of the company's current business. The company warned earlier this week that desktop revenue growth will be flat for the fourth quarter due to pricing pressures, but Dan Niles of BancBoston Robertson Stephens thinks the rest of the business is humming along smoothly as Seagate looks to re-establish itself as the premiere high-end player. "Does the enterprise business look very strong?" he asks. "Yes. Weakness in desktop [disk-drive sales] looks to be offset by strength in enterprise [drive sales]." And Quantum clearly recognizes that there is value beyond the rigid disk desktop market. The company announced earlier this month that it plans to replace its common stock with two classes of tracking stock; one class will be linked to traditional disk drives, the other to higher-end tape drives and storage systems. Current Quantum shareholders, who will receive one share of the tape stock and one-half share of the disk stock for every QNTM share they own, cheered the news. Shares rose almost 20% in one day. It remains to be seen whether Quantum will emerge as a significant threat to storage players like EMC and IBM (IBM), but, if nothing else, the tracking stock should help investors see Quantum in a new light. Niles thinks that Quantum's tape business alone might be worth more than the value investors now place on the entire company. And Glazer believes Quantum is wise to acknowledge the shifting value in storage. "It's brilliant because as a shareholder you're getting two shares of tape for every share of disk drives," he says. The industry could certainly use a stroke of brilliance. While analysts paint a brighter picture for 1999, Seagate's admission of flat desktop sales suggests that there are still pockets of weakness. Units are selling, but pricing pressure, a constant thorn in the side of the sector's leaders, continues to cut into dollar gains in the desktop market. "There is very little visibility on what is going on," Chief Operating Officer William Watkins told Dow Jones on Tuesday. And Glazer suspects that PC demand is not nearly as strong as predictions from the International Data Corp. and Dataquest suggest. Certainly, the recent flurry of revenue shortfalls and warnings from PC makers is not encouraging news. It's hard to separate the good data from the bad data amid the furious cycles of the storage market. But as long as Seagate and Quantum keep moving up the value chain, there's still hope that their stock charts will someday look more like EMC's and less like something out of Coney Island. Gottfried

To: CPAMarty who wrote (5818)	3/11/1999 12:26:00 AM
From: Dave Hanson	Respond to of 9256

Marty, good post. Do you have any #s or sources on how many of the 2.1 platter drives MXTR is still sitting on? It's long struck me as odd that after blowing out virtually all of their 2880 series, most of the 3400 series, and now even many 4320's, they're still selling these 8.4 gig 4 platter 2160's at retail. Heck, the 2880s are over a year old now--ancient history. And now with the 5120's ready to ramp up...I don't know why MXTR didn't blow out the balance of the 2160's to some sub $1K PC OEM 6 months back.

To: CPAMarty who wrote (5818)	3/11/1999 3:04:00 AM
From: La Traguhs	Respond to of 9256

Marty, Some good points. I might not agree with some of the details but I think you agreed, in a round about way, with my post that GMR and capacity per platter don't mean squat to Joe Consumer since we're already providing more capacity on the desktop than most folks really can use. (Entirely different situation on most enterprise/server applications where more is the name of the game) It's price that counts to the consumer and the PC OEM and not how quickly we can reach the superparamagnetic effect.

To: CPAMarty who wrote (5818)	3/11/1999 5:39:00 AM
From: Z Analyzer	Read Replies (1) \| Respond to of 9256

<<They have technology in place for massive volume delivery of 5.2 and that cost is just sitting there because they are still dumping their own 2.1's in addition to fighting with wdcs and samsung cheapos!!! >> As you say, they are losing big money on the 2.1s. Do you know that these drives are still in current production? If not the inventories are supposedly in good shape should be cleared out pretty quickly. It must be cheaper to produce a 2 platter 8.6 than a four platter 8.4. How long does Samsung stay in the business if this is the best they can do? -Z