Seagate, Western Digital, Bell Micro Down On Competitive Concerns

Includes: BELM, STX, WDC
by: Eric Savitz

Daniel Renouard, an analyst at Robert W. Baird, yesterday morning downgraded shares of Seagate (NASDAQ:STX), Western Digiral (NYSE:WDC) and Bell Microproducts (BELM) to Neutral from Outperform over “increasing concerns about the competitive environment in 2007, and near-term weakness in Q1 and Q2.”

The bottom line is that Renouard worries that competition is heating up in the drive sector. He notes that a recent announcement from Hitachi of plans to accelerate new products to market, gain market share and restructure its operations are “aggressive,” and “could lead to irrational pricing behavior.”

He also notes that Samsung has “made a large commitment to broadening its footprint in the HDD market.” He thinks the company will emphasize “footprint over profitability” this year, “a risk to industry pricing and profitability.”

Renouard trimmed price targets on the stocks to $25 from $30 for Seagate, to $20 from $28 for Western Digital and to $7 from $8 on Bell Micro (which by the way is a drive distributor, and not a manufacturer.)

Yesterday, Seagate was down 27 cents at $23.15; Western was down 20 cents at $16.91 and Bell was down 48 cents at $6.40.

STX vs. WDC vs. BELM 1-yr chart

stx belm wdc chart