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Tuesday, April 29, 2008

Hutchinson (HTCH) a mess

Hutchinson Technologies, a manufacturer of hard drive assemblies, misses consensus by 10%. Their commentary about the coming year is pretty lousy.


Regarding industry conditions and the company's outlook for the second half of
its fiscal year, Fortun said storage industry analysts continue to expect disk
drive shipments to increase approximately 12 percent in calendar year 2008,
resulting in continued growth in worldwide suspension assembly shipments.
"However, based on our estimated share positions on customers' programs and a
decline in our average selling price in the second half of our fiscal year, we
estimate that our net sales for fiscal 2008 will be 10 to 15 percent lower than
our fiscal 2007 net sales of $716 million," said Fortun. "Looking ahead, we are
focused on rebuilding our position in the 3.5-inch ATA segment, strengthening
our position in the 2.5-inch mobile segment and maintaining our market-leading
position in the enterprise segment."

Translation: Though hard drive units will grow 12% overall this year, we're going to shrink 15% because we're not catching any of this notebook growth the rest of the industry is. We're stuck in desktop enterprise and struggling for dear life.

Hutchinson has roughly 280mm in cash and equivalents, if you call 94mm of auction rate securities equivalent. The market cap is north of $400mm. It could bleed to book at $12ish over the next year. Not that the company commentary would lead you to buy the stock or anything… but don't.

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