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

To: William Epstein who wrote (730)	3/24/1999 4:57:00 PM
From: Duker	Read Replies (1) \| Respond to of 1989

Seagate Stk Inches Dn; EMC's 5-Yr, $3B Deal With IBM Cited By Amy Hughes NEW YORK (Dow Jones)--Seagate Technology Inc. (SEG) shares took a slight hit Wednesday as investors worried the company may be losing more of the enterprise disk-drive market to International Business Machines Corp. (IBM). Seagate's stock initially stumbled after EMC Corp. (EMC) said earlier it will buy advanced IBM disk drives for its Symmetrix Enterprise Storage systems as part of the companies' five-year alliance valued at $3 billion, said CIBC Oppenheimer analyst James Poyner. Sales to EMC account for a large portion of Seagate's profits, and investors may be reacting to evidence of growing competition for customers in the high-end server market, Poyner said. "IBM is going to give Seagate a run for its money in the enterprise drive market," he said. Seagate spokesman Woody Monroy said the company "loves" the competition and that it doesn't anticipate a fall-off in sales to EMC resulting from its pact with IBM. "IBM has already been selling drives to EMC and will continue to do so, and we don't anticipate any change in our portion of EMC's business as long as we continue to execute well on our agreement with them," Monroy said. Monroy noted investors seem to be overreacting to a "clever press release," which he said simply puts a new spin on a long-standing relationship between IBM and EMC. Seagate's NYSE-listed shares recently traded down 1 3/8, or 4.9%, to 26 3/4 on volume of 5.4 million, compared with an average daily volume of 2.9 million. EMC shares, also NYSE-listed, were up 1 5/8 at 115 1/2, and IBM was up 2 at 167 3/8. Jim Porter, president of market research firm Disk/Trend, said the EMC Corp. and IBM deal is "old news" for Seagate because the company began losing a portion of EMC's business to the computer giant about a year and a half ago. EMC had encountered some micro-code problems with the software installed in certain Seagate disc drives, Porter explained. "But the word in the industry is Seagate has cleared up most of its problems," he said. "It is a company that is on the mend." The IBM pact isn't an indication EMC, a maker of enterprise storage systems and software for mainframe and open systems environments, will curtail its business with Seagate, Porter said. "I think that EMC will want to have both companies with major shares," he said. "They would like to have them compete with each other for heavens's sake." EMC and IBM said earlier their alliance provides for a broad patent cross-license for storage and other technologies. Porter said IBM is simply using its established sales relationship with EMC for high-end servers as an entry point to introduce the company to its new technologies. - Amy Hughes; 201-938-5171

To: William Epstein who wrote (730)	3/24/1999 6:03:00 PM
From: Stitch	Read Replies (2) \| Respond to of 1989

Wm., <<I didn't know that SEG was a big supplier to EMC but certainly, its lost a customer. >> Much too hasty a conclusion. However, any way you read it this is a blow to SEG IMO and frankly comes as a huge surprise to me. You mentioned you didn't know EMC was a customer of SEG. However, I have many posts here that mention the importance of this relationship. EMC is the 800 lb. Gorilla in the disk array (corporate storage) business and SEG's relationship with them has been a major asset to SEG's position in the high end. As you may not recall, SEG's position in the high end has suffered over the last 24 months as market share slipped away to a newly energized IBM and the onslaught of Fujitsu. Only recently has SEG begun to show signs of reestablishing dominance in the high end segment with timely introduction of new models that operate at spindle speeds of 10K RPMs. I am stunned by this announcement. Why EMC is cuddling up to their primary competitor is beyond me, especially in light of SEG's recent showing in the high end. By the way, your analysis of the deal, including the notion that EMC has agreed to buy out IBM's storage business is as flawed a notion as I have heard. <<EMC agrees to buy the storage business by going into a long term deal for IBM's components and patent right licensing. They need to assure themselves of long term future business. >> First of all, IBM has, from the beginning, defined the storage business in many ways, mostly in terms of technical excellence. Your scenario would really be the tail wagging the dog as EMC doesn't have any basic drive technology at all. What EMC does have is a dominant position in a segment of storage that IBM once had and covets muchly. The two companies have been arch competitors and I share some of Duker's incredulity over this deal. Secondly, your analogy to the Dell/IBM deal is flawed as well. Dell has always made IBM compatibles. <<Dell did the same thing in the PC market. Now everything Dell is going to be IBM compatible in the business market. >> Just out of curiosity, what do you mean by "business market"? It is terribly important IMO to understand the primary trend towards recentralization of data. In other words, we are getting more "netcentric" and less "PC centric". This argues for vast installations of data farms, where data will be stored, protected, updated, and accessible via remote communications. We are edging our way towards the disk drive industry being more driven by institutional data storage requirements then by PC OEMs unless the emerging appliance segments gains a dominant market demand position. Seagate's recent regaining of strength in this segment has had a lot to do with their stock price IMO (as opposed to the MMs you like to blame). This announcement by IBM and EMC is going to have to be offset by some rationale before investors feel confident enough to come back IMO. We should watch SEG very carefully at this point IMO. Best, Stitch