Channel check report out today covering 256 drives in the channel:
"Channel inventories increased during the quarter, but still remain well below levels observed during the June quarters of prior years. Over the past two weeks there has been a significant reduction in inventories. It should be noted that during the June quarter channel inventories historically rise and prices fall. Price erosion during the June quarter maintained the same rate as observed since late 2011 and current channel prices are still well above pre flood levels. In lieu of the healthy channel activity during the quarter, it appears product transitions at both Western Digital and at the PC OEMs were a primary driver behind Hutchinson’s recent preannouncement reflecting lower unit demand in the June quarter.
1. A channel check was conducted using a data base of 256 drives currently held at North American distributors; prices for the period 10/12/11, i.e. pre-flood, to 6/23/12 were compared for 2.5" and 3.5" drives of various capacity and spindle speeds
2. Overall channel prices are still up 22.5% relative to pre flood pricing, while prices for forty of the more popular drives in the channel are up still up 27.1% compared to pre flood pricing for these drives
3. Overall, drive prices maintained their 8% quarterly erosion rate, relative to the pre flood pricing, which has been observed since late 2011; as such, we see channel pricing remaining elevated relative to pre flood pricing into early next year
4.Inventories have recovered from the severe back ordering level seen earlier this year, but still remain modest compared to inventories held in the June quarters of prior years
5.Relative to Western Digital drives, there has been an abundance of Seagate 3.5" drives in the channel this quarter which we attribute to desktop product transitions at Western Digital
6.Desktop 7200rpm, 500 GB and 1 TB drives are seeing strong demand
In lieu of these observations, we are SURPRISED THAT INVESTORS REACTED NEGATIVELY TO PRIOR MID-QUARTER CHANNEL CHECKS SHOWING SIMILAR DATA.