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

To: Stitch who wrote (733)	3/24/1999 8:37:00 PM
From: Duker	Read Replies (1) \| Respond to of 1989

I agree that we need to know more, but I am not crushed by it. Yes, EMC is an important part of the high-end equation ... I do not have a revenue breakdown ... but they are not a 10% customer. MARKETING AND CUSTOMERS [from the SEG 1998 Annual] The Company sells its products to OEMs, distributors, resellers, dealers, system integrators and retailers. OEM customers incorporate Seagate drives into computer systems for resale. OEMs either manufacture and assemble computer system components into computer systems; purchase components to build their systems; or purchase complete computer systems and integrate the drives and other hardware and software. Distributors typically resell Seagate disc drives to small OEMs, dealers, system integrators and other resellers. Certain resellers to which the Company directly sells its products also resell Seagate drives as part of enhanced packages (e.g., an add-on kit for a computer or as part of their own computers). Shipments to OEMs were 65%, 71% and 72% of disc drive revenue in fiscal 1998, 1997 and 1996, respectively. In 1998 and 1997 sales to Compaq Computer Corporation accounted for approximately 13% and 11%, respectively, of the Company's consolidated revenue. No other customer accounted for 10% or more of consolidated revenue in 1998 or 1997. No customer accounted for 10% or more of consolidated revenue in 1996. In 1998, consolidated revenue declined to $6.819 billion from $8.940 billion in 1997. In response to this decline in revenue the Company initiated a restructuring plan to align its worldwide operations with market conditions and to improve the productivity of its operations and the efficiency of its development efforts. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--1998 vs 1997." Still, if they are a 9.4% customer ... it is still a significant piece of revenue ... but, it would be very unlikely that IBM completely dislodges SEG at EMC. That would be counter productive from an EMC standpoint ... Why go out of your way to create a sole source supplier relationship ... when your primary/or even secondary supplier is technically up to date and reliable? Obviously, it would be better for EMC to play the two competitors to play off of one another. Let's face it. EMC has grown tremendously, but SEG high end revenue has collapsed since Q3FY97 from $1.398 Bn to $846 mm last quarter. Perhaps that is due in part to share loss at EMC ... but I doubt that explains the $550 mm peak to trough difference. EMC is a piece of the puzzle ... but not the end all. I think we saw the market react without putting a bunch of thought into this one. There are a lot of questions that need to be answered before you clip a half a billion dollars of market cap off of SEG based on an ambiguous announcement ... maybe it is justified with the RDRT announcement ... but, I would argue that it is a completely different animal. I am heartened that you sound as down on this announcement as you do, Stitch. It is generally a nice buying opportunity when we feel uncomfortable and depressed. --Duker