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Hutchinson Technology Inc. Message Board

  • longtimefollower longtimefollower Jul 26, 2011 5:59 PM Flag

    Slightly exceeded my expectations.

    Net loss, non-GAAP, adjusted, was $7.2 million, versus my expectation of $7.5 million.

    They are maintaining guidance that 60% of the cost savings for the $50-55 million annualized savings restructuring, will be in place in the 9/30/11 quarter.

    They guided for 5-10% shipment growth in the 9/30/11 quarter, sequentially. (HDD makers are guiding for low single digit growth for the broader industry.)

    "It looks like that 5-10% is a very safe range, for what we can pull this looks pretty strong."

    "In all likelihood, we think this represents......we're not expecting things to drop off in the Dec. quarter."

    Factoring in cost savings, and revenue increases, my guess is they lose no more than a couple million in the Sept. quarter (adjusted), and return to profitability in the Dec. quarter.

    Additional notes from conf. call:

    Thailand is ahead of schedule.

    "We believe our competitive position is strengthening."

    "Demand looks solid through August, with less visibility through September."

    Share count 23.4 value $9.17, at qtr. end.

    Expect SG&A to be $28 M on an annualized basis, when restructuring actions are completed.

    Int. exp. to increase to $4 M per quarter, after refinancings/exchanges.

    Analyst Q&A:

    Gained market share with Seagate? "Current programs were strong....working on new programs, as well."

    Growth in notebook line for HTCH was greater than market. Why? Japan supply problems benefited HTCH. Share shifts from 2 acquisitions in HDD industry are also helping HTCH.

    Remaining debt callable Jan 2013? What will happen? "much more manageable...we expect we will likely finance a portion of it, focus on our performance, improve the financials. Not aggressively pursuing additional financing in the near term." (IMPORTANT: Hint seems to be that cash flow generation will help reduce debt.)

    Temporary share gains related to tsunamis?? Hard to peg. Customer confidence is growing. "I think we're on a march to move our volumes and our share up from this point." Getting positioned much more competitively....hearing that from our customers...and they're behaving that way."

    Sept. is not completely hazy. "We see a pretty decent quarter."

    Net cash burn outlook: "We think we can be fairly neutral in cash, this coming quarter [net]."

    "We are expecting to start generating cash with the 12/31/11 quarter."

    Was finl strength an issue in folks staying away from HTCH: Yes, CFO to CFO. Financing activity and changing cost structure has brought enough confidence to bring customers back to HTCH. "Nobody stayed away entirely, but they limited us."

    Very significant shifts at HTCH in the recent past, not to mention refinancing (which helped change customer viewpoint on HTCH). "Customer confidence is going up." Customers are aware of what HTCH is doing (on a cost basis), while maintaining its rep. for technological capability.

    Is there any new high lvl. discussions about supply chain diversification (in re earthquake). Is this driving share increases? "I think you're looking at that the right way." Having another source for the additive flexure with TSA+ is helpful to HTCH.

    Cap. ex & D&A guidance for fiscal 2012....$20 M and $42-44 M, respectively.

    Fortun thinks the last 4 years were a "respite in the technical demands of the suspension." That has been changing recently. Those changes benefit HTCH, because of its reputation for engineering.

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    • "Gained market share with Seagate? "Current programs were strong....working on new programs, as well."

      Yes, from 9% market share with Seagate in F2Q to 14% F3Q. So Hutch is gaining share with Seagate already with the existing programs. Thailand plant has been qualified with "another customer" and now waiting for that customer {Seagate?) to Qualify the TSA+ product.

      I predict if/when Hutch announces a Seagate or whoever Qualification for this product the stock WILL SOAR on the announcement. Seems like with the MOMENTUM Hutch is QUICKLY GAINING that that day could be right around the corner.

      The CC went pretty much as I expected with NO NEGATIVES but PLENTY OF POSITIVES particularly the above industry revenue growth forecast for F4Q of 5%-10% along with another 5M in cost reductions.

      Put it all together and Hutch is ON TRACK to report a nice profit in Jan.2012 during the "7th inning stretch". Between now and then there is likely to be some analyst UPGRADES and UPWARDS EARNINGS ESTIMATES revisions and PRICE TARGETS which should give some pops to the stock. Also, QUALIFICATION announcements on NEW PROGRAMS should also cause the stock to pop nicely. The return of some MOMENTUM traders and additional VALUE investors could allow Hutch to trade up to book value with the return to PROFITS which coincides with the SEASONAL TECH RUN-UP into the new year.

      Thanks very much LTF for your updates and opinions on HTCH! Your timely and accurate analysis of HTCH should allow your viewers to profit handsomely - IF they listened closely to what you have been articulating the past few weeks here. Congrats! You now have a new VALUE investor follower.

      • 1 Reply to fishing_for_bargains
      • I agree with everything you say, and think you put it very well. Except I am a little less certain of the price targets you espouse...although i can certainly "taste" them...and JUSTIFY them, in my mind.

        I've been doing value investing for a long time, and I KNOW how the Street tends to value stocks, relative to fundamentals, and perceptions of risk, and the expected effect on a stock price from a SUDDEN CHANGE in those measures.

        It is therefore AGAIN worth repeating that with the DRAMATIC REDUCTION IN RISK here, the last several weeks (company is now guiding for roughly cash flow neutral in the CURRENT QUARTER...and positive in the next!), the current stock price is still, in every reasonable sense, "artifically depressed" (a lingering effect of the huge sell off of the last couple years).

        One has to ask, therefore, with the balance sheet we have now, and the expected return to profitability, what the RISK is....and why we are trading at such a dramatic discount to historical trading ranges (apart from needing to factor in the lower convert price of $8.60 vs. $36 on the "new" converts).

        This stock needs to start being priced on its POTENTIAL....since its risk should be MUCH MUCH less of a concern, than it was, say, a mere 2 1/2 to 3 months ago. (This is an IMPORTANT point on why HTCH is still very very undervalued.)

        The pricing in of doomsday was absurd. But for those who thought that sales would just keep declining, it was hard to rationalize wanting to take a position here. Lucky them. The risk has been largely taken out, and the stock is STILL dirt cheap.

        There's a whole "crop" of potential investors for this company now. And it will expand all the more markedly, when we go above $5, which will "justify" institutions piling in.

        Sit, and wait, and be rewarded. Imho.

    • Now we get 'personally' transcribed minutes from the meeting...

      Still promoting I see. The pied piper first brought his desperate souls in here north of $5.00

      Wow what a business...we have strong demand the next 30 days...

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