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Hutchinson Technology Inc. Message Board

  • microcaptrader microcaptrader Jan 18, 2014 11:40 PM Flag

    Is the fear here that solid state drives will make Hutchinson's products obsolete?

    You guy's have mentioned HTCH a few times so I thought I would investigate. I haven't even started DD yet, but that was the first thought that popped into my head as a reason for the company to be selling below TBV.

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    • Absolutely not. Look what happened to OCZ. They just filed for bankruptcy.

    • The capacity for storage keeps increasing so SSDs are always playing catch-up.

    • "a reason for the company to be selling below TBV...a few years ago Hutchinson moved their operations from high cost Minnesota to low cost Thailand. It took longer than expected for the restructuring. Than the Thailand floods hit putting their operations under water. Hutchinson just couldn't seem to get it together. Now it seems things have changed. They just guided up for the quarter and operations are looking better. That's the way I look at it anyways...Good Luck

    • micro, this is not why I own HTCH, but consider the following as well:

      A decade ago there were perhaps 7-10 companies (including the captives) that made "suspensions". Today there are three - Hutch, Magnecomp, NHK. Compare this to the number of drive companies then vs. now and the health of those companies then vs. now. Years ago there were 10+ drive companies, now for all practical purposes there are two - Seagate and WDC. Seagate and WDC financial health, futures, outlooks, and stock prices have skyrocketed due to rev growth and earnings and cash generation. When Hutch, Mag, NHK get down to two the same could happen.

      Due to the increasing value add and complexity and integration required of the Hutch, Mag, NHK parts it seems likely (to me) that Seagate and WDC are going to buy one or two of these companies and bring them in house. The market caps of Hutch and the others are peanuts, mere pocket change, compared to the cash that Seagate or WDC could pay.

      Like I said, I do not own Hutch for these reasons, I own it because they have the best parts, are gaining market share in a growing market, and will be very profitable soon and the book value will rise and at some point the share price will be several multiples of book.

    • Hi micro, It is a reasonable "first thought" but it is also one with no merit. If you dig a bit deeper you will understand why. A couple basic reasons on why it is without merit.....hard drives are still the cheapest (by far) way to store data, hard drives are still (by far) more reliable for long term storage (as compared to solid state, but not tape), there are not enough fabs in the world to produce solid state components to capture even 10% of the total storage demand, it would cost close to 50 BILLION to build those fabs and a decade or more to get them up and running, look at the evolution of Hutch parts over the last two decades and note the increasing value add and functionality they are bringing to the drive guys, understand a hybrid drive, and on and on. Also, do yourself a favor and read the lengthy and extremely interesting Stephen Luczo interview (Forbes or Fortune I think but not sure, it was a Q&A format) of a year or two ago.

      When I went to work in the HDD industry in 1997 all the same concerns as today were being talked about, it is now almost two decades later and the same concerns are even further from reality.

      To simplify it further, as long as HDD remain the cheapest way to store the worlds ever increasing (exploding in fact) data demands, Hutch will be just fine.

      Happy Researching!

    • ".... but that was the first thought that popped into my head as a reason for the company to be selling below TBV."

      Well, given the company's operational results over the past few years, its TBV has been coming down steadily. So it's not that surprising to see. Not saying that will necessarily continue to be the case going forward. who knows. there are a couple of posters here who seem to expect that to change dramatically over the next few quarters. we shall see. good luck to you.

      cheers.

    • Yes.

      Sentiment: Hold

 
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