A good post reply on the Seeking Alpha site
Posted by joro_ianev
There are two HUGE flaws in your analysis. First, you are viewing supply as static -- i.e. the supply lost in Thailand will NOT be picked up by other parts of the world. That will be hardly the case. I can guarantee you that as I type this new equipment is being assembled to be located in WDC, STX, Hitachi, Samsung and Toshiba factories. Also, anybody in the supply chain that wasn't on a 24/7 schedule is now on it. As an example, take a look at the minimal impact the earthquake in Japan had on the technology companies. The recovery in the supply chain occured so quickly that the impact of the quake was almost nil.
Second flaw relates to HDD pricing. Do some digging on the web and you will see prices up anywhere from 10%-100%. Those 50 mln drives STX sells will bring in substantially higher revenues this quarter than the 52 mln brought last quarter. And every dollar from higher ASP is a dollar that flows straight to net income. Now, I fully expect the upstream suppliers to charge more for their components, so it won't be a 100% flow through from sales to net income, but I do believe it will be >50% impact (i.e. every $1 in higher ASP is >$0.5 in higher Net Income, the remainder going to pay for higher expenses).
