Jim Chanos believes in the mobile revolution, and that means the death of the PC and all the businesses that exist within the PC family.
At the annual Sohn Investing Conference today, he focused on one branch of that family (which he identified as value traps, of course) in a presentation called, Mobile Computing Revolution: Collateral Damage in Hard Disk Drives.
"Most people have way too much storage as it is on their laptops and desktops," he explained. "The move to the cloud is actually more efficient... The amount of storage out there still exceeds the needs as fast as data is growing."
In short, no one needs hard drives anymore.
Companies like Samsung are exiting the business as quickly as they can. In fact, he pointed out, Samsung sold their disk drive business to his short pick at half of revenues in 2011 — the short pick is Seagate.
He mentioned another company, Western Digital, in his presentation as well, but he particularly focused on Seagate because it's exhibiting all the characteristics of a classic Chanos short.
First off, there are, of course, accounting issues. It wouldn't be a Chanos short if there weren't. Seagate put about $1 billion of goodwill on the books after its Samsung acquisition, which can be great way to mask cash flow problems.
Not only that, but the top 3 person in the company quit last night.
And if this isn't enough for you, Chanos put up a table that shows that the top Seagate stock holders are selling like crazy.
"I think it'd probably be best if you did too," he closed.
The stock was trading at $42.32, and is now down 3.36% in after hours trading.
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