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

To: Mark Oliver who wrote (6479)	6/4/1999 1:18:00 AM
From: Frodo Baxter	Read Replies (2) \| Respond to of 9256

>I guess what I meant to say was a lot of companies that had been holding inventory of disk drives are liquidating, creating a supply demand imbalance. There's a misperception by a lot of industry analysts that when you mop up inventory, pricing naturally cures itself. This is wrong. What happens is you mop up the initial supply demand imbalance that is an indicator of overcapacity. But that capacity isn't going anywhere, it's just idled. Overcapacity has been around for the past two years! The only way for this to be fixed is: huge demand upswing, consolidation, and/or bankruptcy. The first is a pipe dream, especially when you consider the industrywide 100+% areal density increases. The second and third options become more palatable every day. >Now comes the big question for the thread. Is this a Quantum problem? Or, is this the first in a series of announcements? The latter. About a year and a half ago, I wrote a letter to Quantum suggesting (what else?) that they do a partial IPO spin off of DLT. I also suggested they use the funds raised from such an endeavor to consolidate the industry by taking over WDC, either in a friendly or hostile merger (Maxtor was still a pipsqueak back then). WDC had been caught flat-footed by industry pricing and their late transition to MR heads, but still had all sorts of valuable assets, physical, intellectual, and intangible. I even suggested that they were significantly underleveraged! Instead, everybody decided to proceed with business as usual. WDC got into hock, pissed away all its shareholder equity, foisted its media ops to Komag, and brought in expensive IBM technology. This industry is full of great and not so great tactical leaders. But they are all strategic dunces. In every other industry known to man (banking, autos, oil, etc.) CEOs speak repeatedly about overcapacity and active consolidation as the solution. Not here. Nope, here, you hear plaintive wails about "aggressive industry pricing" and "market conditions" and "significant price erosion." When are they ever going to get a clue?