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Author: jchoy Two stars, 250 posts Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211751  
Subject: ot: stx Date: 9/6/2012 8:03 AM
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Seagate Technology PLC (NASDAQ:STX) has offered $90.3 million to purchase the cavernous Solyndra solar-panel factory along Interstate 880 in Fremont, according to new documents that have been filed with the U.S. Bankruptcy Court. The proposed purchase price is 70 percent lower than the $300 million cost of construction of the building, as was detailed in bankruptcy court records. The Obama Administration’s Energy Department underpinned development of site via a 535 million loan guarantee.

does anyone have any idea of what they might do with a solar-panel factory? My best guess is that they're just buying it cheap (?) to increase normal production capacity. I can't imagine them starting to make solar panels. At least that sounds outrageous enough to be less than plausible.
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Author: cwags02 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193861 of 211751
Subject: Re: ot: stx Date: 9/6/2012 9:54 AM
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jchoy -

They want the clean room facilities for their drive manufacturing. The plant was $300mil(ish) when it was built. Getting it for $90mil is a pretty good deal.

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193878 of 211751
Subject: Re: ot: stx Date: 9/6/2012 4:00 PM
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Speaking of Seagate, you gotta love owning a company that's out of fashion.

Trailing earnings are too "rear view mirror" and forward earnings are always too iffy.
Value Line has a nice definition of "current earnings": the most recent
two quarters of actual results excluding extraordinary items, plus two
quarters of forecasts. The forecasts that soon into the future aren't
usually unduly optimistic, and they capture seasonal effects.

Compare
Seagate   STX    Current EPS $9.02   Dividend $1.28   ROE 21%   Stock price  $31.70
Amazon AMZN Current EPS $0.97 Dividend $ .00 ROE 8% Stock price $251.41

Sure, Seagate's earnings might be a little above trend right now—cyclically adjusted might be as low as $6.
But those Amazon shareholders are going to have to wait a long time for
that very rosy future for which they have amply prepaid.

Personally I think Seagate has by far the better moat, too.

Jim

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Author: DutchMark Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193880 of 211751
Subject: Re: ot: stx Date: 9/6/2012 4:23 PM
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Personally I think Seagate has by far the better moat, too.

That must be very personal indeed. Personally I think there are half a dozen companies in the world that do what Seagate does. I can't think of a single company that does what Amazon does. At best there are some companies that do one or two of a dozen things that Amazon does, but fail to have the credit-card database, the brand recognition, the eye-balls, customer loyalty, the network effect etc. etc.

I do agree with you about the pre-pay part though. So no AMZN shares for me either.

Mark

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193881 of 211751
Subject: Re: ot: stx Date: 9/6/2012 4:42 PM
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Personally I think there are half a dozen companies in the world that do what Seagate does.
I can't think of a single company that does what Amazon does.


I know most people don't agree with me (and never will)—it's pretty obvious from the share prices.
That's what makes a horse race!

As for Seagate, there are only 2.5 players now. (Seagate and WD at >40% market share each).
Nobody new is going to enter the rotating media business, it's too hard technically.
The SSD players are mostly jokers and don't understand delivering
reliable systems rather than cheap devices, so they don't figure.
Margins are huge.
Data centre demand (in TB) is rising at 40% a year.
The price advantage over flash has been rising, not shrinking, for 10 years.
It's a nice business, and the margin of safety is gigantic.

Amazon is a perpetual low-margin no-ROE business. Always has been and I assume always will be.
Outside the US there is perhaps a negative moat, inside the US a marginal one at best.
I don't see one at all, but then I don't live in the US.
It's a business based on having the best price, with no barriers to entry
and perfect price comparison ability. The sales tax scam is going away.
The appearance of "brand loyalty" comes solely from their high sales
figures which they are purchasing with their low cost of capital, 1999 style.
There is an infinite demand for stuff sold at no profit, but why bother?
I would certainly short them, but it seems they have managed to find an extremely
large number of gullible shareholders who stick with them through thick and thin.
Well, through thin and thin.
Plus, it's already priced for 20 years of results better than they have
ever managed in their best quarter ever. I put it in the "too dumb" pile.

; )
Jim

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Author: DutchMark Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193883 of 211751
Subject: Re: ot: stx Date: 9/6/2012 5:05 PM
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The SSD players are mostly jokers and don't understand delivering
reliable systems rather than cheap devices, so they don't figure.


With that I agree. But it only takes one SSD maker to figure it out. The prices coming down is just a matter of time. It still may take a decade or two to play out, but it's obvious they're making buggy-whips in a time where more and more ride horse-carts but the automotive car has been invented and proven to work.

Mark

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Author: DutchMark Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193887 of 211751
Subject: Re: ot: stx Date: 9/6/2012 7:57 PM
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As for Seagate, there are only 2.5 players now. (Seagate and WD at >40% market share each).
Nobody new is going to enter the rotating media business, it's too hard technically.


I thought there were more. But it seems over the past years Seagate and WD have been gobbling up the competition, buying everyone up. Is Toshiba the remaining one?

I never assume something is too hard for everyone else. Even Intel isn't totally impervious to competition. They may be ahead, but can't rest on their laurels either. What is hard now is very easy the next decade. Trying to corner a market like Seagate and WD seem to be trying brings its risks with it.

Mark

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Author: deucetoace Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193897 of 211751
Subject: Re: ot: stx Date: 9/7/2012 9:53 AM
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Trying to corner a market like Seagate and WD seem to be trying brings its risks with it.

You may well be right but there seems to be sufficient margin of safety to allow for any such risks in the current price. A forward Pe of 3.5 and a 4% yield allows for quite a lot of risk in an oligopoly situation.

deucetoace

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Author: WuLong Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193900 of 211751
Subject: Re: ot: stx Date: 9/7/2012 10:53 AM
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is a perpetual low-margin no-ROE business. Always has been and I assume always will be.
Outside the US there is perhaps a negative moat, inside the US a marginal one at best.
I don't see one at all, but then I don't live in the US.
It's a business based on having the best price, with no barriers to entry and perfect price comparison ability.
The sales tax scam is going away.
The appearance of "brand loyalty" comes solely from their high sales figures which they are purchasing with their low cost of capital, 1999 style.
There is an infinite demand for stuff sold at no profit, but why bother?

Not trying to be a jerk here, but with the exception of the sales tax argument (and of course, clicks vs bricks), how does this differ from WMT's model?

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193902 of 211751
Subject: Re: ot: stx Date: 9/7/2012 11:58 AM
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Not trying to be a jerk here, but with the exception of the sales tax
argument (and of course, clicks vs bricks), how does this differ from WMT's model?


Walmart has made it work. Amazon hasn't.
Walmart has had consistent ~20% ROE for decades.
What is the magic in Walmart? harder to identify. I see it as mainly
crushing purchasing power from economies of scale and logistics systems
to give the lowest cost provider advantage that no one can match.
Can you imagine trying to compete with Walmart on price?
But that's just speculation. There is no doubt magic sauce in there that I don't fathom.
They also have a rapidly falling share count rather than a rising one,
a symptom of an embedded cheapness from top to bottom that is good for shareholders.

To sum up, I see the difference in that, though they are in different markets,
they have both taken the approach of attacking the toughest piece of
their respective markets: ultimately being sellers on price alone.
But Walmart is able to purchase and fulfill with the lowest costs and Amazon isn't.
Individual package shipping costs will always be a big problem—it's expensive.
Paying for "free" shipping for some customers in some countries isn't
a solution as the extra money still has to come from the clients
once the shareholders are tired of buying market share.

What is good about them?
I like the Kindle business a lot, it definitely has legs.
There might be network value in being the "go-to" place for printed
books though that doesn't seem to have much of a bright future.
To me the rest of the business doesn't seem to have interesting economics.
I guess there's a price at which I'd like it as there are some moaty bits buried in there.
Maybe 15 times current earnings? ($15 a share, 6% of today's level)

But maybe not; they are terrible capital allocators and they don't
really have the understanding to build advantages outside the US.
(zero digital content available in most countries, no free shipping plans,
their websites don't support separate country/language choices, way too many
items are automatically shipped from the US causing customs and
shipping fees to soar, blah blah blah. The textbook "what not to do" list.)
There's nothing wrong with being a success only in the US as long as
you realize it and don't spend your investors' money elsewhere.

As I mentioned before, I know nobody else seems to dislike them as an investment.
I'm quite aware that I'm alone in thinking they are useless idiots and
should be avoided and that I'm unlikely to convince anybody else.
Just sayin', I personally don't see any attraction.

Jim

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Author: DrtThrwingMonkey Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193903 of 211751
Subject: Re: ot: stx Date: 9/7/2012 12:05 PM
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perpetual low-margin no-ROE business. Always has been and I assume always will be.
...
It's a business based on having the best price, with no barriers to entry and perfect price comparison ability.
The sales tax scam is going away.
The appearance of "brand loyalty" comes solely from their high sales figures which they are purchasing with their low cost of capital, 1999 style.
There is an infinite demand for stuff sold at no profit, but why bother?

=========

Not trying to be a jerk here, but with the exception of the sales tax argument (and of course, clicks vs bricks), how does this differ from WMT's model?



The difference between Amazon and Walmart are very striking.
ROE: Amazon: low or negative, Walmart around 20%, year after year
Best price: both companies do have low prices, in this regard they are similar
Sales tax injustice: its correction will hurt Amazon and help Walmart
Brand loyalty: probably not much for either company
Infinite demand for stuff sold at no profit: Amazon is low profit or no profit, but Walmart is low profit, that is the huge difference between the two.

Amazon has about a 1% net profit margin, and Walmart has a 4% net margin. Amazon trades for asbout 300 times its profit, and Walmart trades for 15-16 times its profit. In other words, Amazon trades as though it could have much higher margins. The bull case for Amazon is that they have razor thin profit margins because they are investing for growth, and that they will eventually have much, much higher margins. This is possible, but it is already very fully priced in, and if Amazon can do it, it will be against a headwind of a fading sales tax advantage.

Regards, DTM

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193904 of 211751
Subject: Re: ot: stx Date: 9/7/2012 12:37 PM
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I'm quite aware that I'm alone in thinking they are useless idiots and
should be avoided and that I'm unlikely to convince anybody else.
Just sayin', I personally don't see any attraction.


You did not convince me. But I did not need convincing. I never bought any Amazon.com stock. I buy books, CDs, and a few misc. items from them. But I cannot see a serious moat, and it never seemed to me to be more than any other IPO. Make the money somehow on dumping it soon after the IPO and forgetting about it.

Of course, similarly, I do not own any CocaCola stock. Now at the right price, that might be a good investment. But even here, I have my doubts. As times get tough, really tough, people will have to switch to water. And I fear they may someday go to war to get it. But will the bottling companies make the money on that?

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Author: WuLong Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193905 of 211751
Subject: Re: ot: stx Date: 9/7/2012 12:40 PM
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DTM: Amazon trades for asbout 300 times its profit, and Walmart trades for 15-16 times its profit
Jim: Just sayin', I personally don't see any attraction.
My question was not so much about the stock as about the model and the moat (or lack of one).

DTM: Brand loyalty: probably not much for either company
Jim: There is no doubt magic sauce in there that I don't fathom.
At this point in time, it seems to me that both companies have ubiquity going for them, much like SBUX.
I know something about how both WMT and AMZN handle logistics but have not been on the inside with either company.

Thank you for the comments. As I said, I'm not trying to be a jerk, just trying to understand a little bit better.



Disclosures:
I own COST and WMT.
I own SBUX and PNRA, and have traded PEET.
I have never traded AMZN.

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Author: crschoen Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193908 of 211751
Subject: Re: ot: stx Date: 9/7/2012 1:48 PM
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Cool discussion, takes me back to 1999. Anyway, I don't think it would take much for AMZN to improve their ROE (easy for me to say right?). Their shareholders equity is relatively small compared to WMT and they are investing in R&D/innovation. That's why I don't think ROE is a good comparison tool.

As for moats, I find the Kindle products to have very strong moats as they lock you into the Amazon stores. The Amazon on-line shopping moat has been debated for over a decade now and seems to be holding up well to me.

Should be interesting if the rumors of next-day delivery come to fruition. I certainly would rather do a next-day delivery for an item, than have to venture into my local WMT.

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Author: hedgehog444 Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193911 of 211751
Subject: Re: ot: stx Date: 9/7/2012 2:38 PM
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As for moats, I find the Kindle products to have very strong moats as they lock you into the Amazon stores.

I'm struggling with this one. I have lots of kindle books but no kindle device. I read everything on my iphone, as well as nook books and gutenberg books. So yes, I buy the books from amazon (and there is likely to be another price war after the antitrust settlement), but I'm not seeing much moat in the Kindle device. JMHO.

Rgds,

HH/Sean

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Author: DutchMark Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193914 of 211751
Subject: Re: ot: stx Date: 9/7/2012 3:35 PM
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their websites don't support separate country/language choices

That is simply not true. http://www.amazon.fr/ is in French, http://www.amazon.de/ is in German. The Brazilian Kindle store is in Portuguese.

What I see happening is Amazon emerging as a powerhouse in delivering digital content. This on the back of the online retail system. They are not Apple, but with the Kindle they had the right idea. And their latest offering that they just revealed looks like the first serious contender to the iPad.

I'm not talking about the stock. I'm not arguing Amazon is a better investment than say Seagate. The AMZN price indeed looks like it will make a terrible investment. But Amazon as a business has been building out solidly from the get-go in the late '90s. Since then it has happened before that the stock soared, only to drop back to more realistic levels. But Bezos just keeps working at expanding his empire without too much short-term concerns by shareholders. (Who are probably happy now, maybe not so much in a few years.) Never was there any doubt about the viability of their business, even during the dot-com crash.

Even though I own an iPad, I buy all my e-books at Amazon because they offer more choice and a better customer-experience than anyone else.

Their cloud business, while not a big component (yet) of their market-cap, has also established itself as a standard few competitors are able to meet. You can tell how entrenched they are in that area when Virginia has a major power-outage. Half the Facebook apps become unavailable, Netflix stops working, the effect is felt considerably throughout the web.

Having credit-card details on file is also worth something. I believe there are only three companies that have 100M or more on file. The other two being Facebook and Apple. Way ahead of everyone else. Consumers don't switch easily if they have to register and enter credit-card details with a web-site, it's a considerable barrier. It's for that reason that a lot of smaller online businesses start to use Amazon as a payment gateway for online orders.

So so far, I only see their moat become wider every year.

Mark

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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193915 of 211751
Subject: Re: ot: stx Date: 9/7/2012 3:43 PM
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their websites don't support separate country/language choices
...
That is simply not true. http://www.amazon.fr/ is in French, http://www.amazon.de/ is in German.


You have confirmed exactly what I said: there is no separate country/language choice.
You can't shop on the German site in any language other than German, and so on.
You can't do a Europe-wide search for goods; it's like you have to switch
to the California site and enter your search terms and check out in Spanish
to get something shipped to Ohio. (well, bad analogy, but you get my drift).
They don't calculate what the correct duty and shipping will be for things coming from the US.
Tons of firms get this sort of stuff right, but Amazon is clueless about this and so much else.
Sears is (rather surprisingly) about the best I know of at this sort of thing.

You mention their cloud business:
It's a capital intensive commodity business with very serious deep-pocketed rivals.
If I didn't already know they were getting into it I would have guessed ; )

I absolutely agree that the Kindle/bookstore combo business is an excellent one.
If they spun it off I would buy into it in a flash even at a high multiple.

Jim

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Author: karensie Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193926 of 211751
Subject: Re: ot: stx Date: 9/8/2012 7:09 AM
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"As for moats, I find the Kindle products to have very strong moats as they lock you into the Amazon stores."

"I'm struggling with this one. I have lots of kindle books but no kindle device."

Consider this?

Kindle Fire HD 8.9" 4G LTE Wireless

http://www.amazon.com/gp/product/B008GFRDL0/ref=ms_sbrspot_7...

Tim (has owned "basic" Kindle for 2 years, currently reading the collected works of Sir Arthur Conan Doyle downloaded for $1)

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193927 of 211751
Subject: Re: ot: stx Date: 9/8/2012 8:47 AM
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FWIW the nicest present I've got in years, from my daughter, was a Kindle. After three years it stopped working and I have another basic. It's great, although the original one mysteriously has come back to life. It would take porting my Kindle library to make me switch.

Re-read all of the old favorites. Treasure Island -- to discover the source of one of my favorite phrases "Them's that died be the lucky ones." ;-)

HP

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Author: rationalwalk Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193928 of 211751
Subject: Re: ot: stx Date: 9/8/2012 9:13 AM
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It would take porting my Kindle library to make me switch.

The main reason I have yet to accumulate a significant e-book library is precisely because Amazon's DRM technology creates a lock-in effect that I do not wish to subject myself to. I download free books and on rare occasions pay for fiction titles that I'm unlikely to ever care about reading again. But I do not buy any investment or business book on the Kindle or even fiction that I may want to reread or perhaps give to friends and family. Apple was able to get rid of DRM for music and I'd like to see the same thing happen for books before I build an e-book library.

I used to have a Kindle 3 (now called Kindle Keyboard) but gave it away when I got my iPad earlier this year.

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Author: DutchMark Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193929 of 211751
Subject: Re: ot: stx Date: 9/8/2012 12:46 PM
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No need to 'port' anything, as long as you have a device listed here http://www.amazon.com/gp/feature.html/ref=sa_menu_karl3?ie=U...

Mark

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Author: FLARAM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193935 of 211751
Subject: Re: ot: stx Date: 9/9/2012 10:07 PM
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Three items in this thread that I have had direct experience with this week :

First I have ordered many items from Amazon both the US and French sites (gifts to French friends) and always had excellent results. If you can't figure out what you want in French (I'm too hard headed to ask my wife to translate) the French Amazon site has help in English, just go to the upper right on the screen and select Aide.

Sears is (rather surprisingly) about the best I know of at this sort of thing
They might be alright in the language department but not much else. I recently spent over three hours trying to get a broken handle for a clothes dryer under warranty (less than 6 months old). First they claimed they had no record of my purchase nor even though they had delivered it to my house. Luckily I still had the dated receipt. They had me at an address several years old. After talking to several representatives, being hung up on a couple of times I thought I had things straightened out, I even had them assure me that my address had been corrected. Naturally they sent the part to the wrong address. I think I am beginning to understand why they are having trouble keeping customers.

Third as someone who was a disk design engineer over 40 years ago and has followed the supposed demise of the mechanical spinning platform for the last 30 of those years. Although it will eventually happen it won't be any way near as quick as most think. Remember Bubble memory. First overall data storage continues to grow at a very brisk pace with no end in sight. Alternative SSD technology is faster but will not be that much cheaper than disk for many years.
I have a little non mechanical money in STX, it just looks like too many are writing it off to soon especially with most of the competition having fallen by the wayside.

RAM

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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193936 of 211751
Subject: Re: ot: stx Date: 9/9/2012 10:57 PM
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I think I am beginning to understand why they are having trouble keeping customers.


They lost me about 30 years ago. I think I bought two Craftsman open-end wrenches since then.

What killed them for me is that I had picked up some underwear and socks for an upcoming trip. I spent 10 minutes or so at a cash register, but no clerks in sight. I visited a few other registers: same problem. I hunted down the manager and asked how I was supposed to pay for this stuff. He got excited and hollered into the telephone and then assured me if I went back to the register in the department from which I got the goods, there would be a clerk there. I went, and there were several other people now waiting at that register, but still no clerk. By then 1/2 hour wasted.

It would have been easy enough to shop-lift the stuff, but my ethics did not permit that, so I dumped the stuff on a nearby counter and left the store.Now I buy most of my clothing from L.L.Bean on-line, and underwear and stuff from Macy's at my local shopping mall.

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Author: Zamboni Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193937 of 211751
Subject: Re: ot: stx Date: 9/9/2012 11:26 PM
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Now I buy most of my clothing from L.L.Bean on-line, and underwear and stuff from Macy's at my local shopping mall.</i.

I put in a limit order for STX Saturday and hoped to glean something from this thread about my potential purchase.

Then I read something like this. Talk about a pirated thread!!!


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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 193968 of 211751
Subject: Re: ot: stx Date: 9/11/2012 1:15 PM
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Sears is (rather surprisingly) about the best I know of at this sort of thing
...
They might be alright in the language department but not much else.


No shocker—one of the reasons I was surprised they did internationalization (or anything) so well.
About the best I can say for Sears is that I don't think they're going
to go bust in any messy way and someone who agrees with that view can
make an absolute fortune writing puts for people who disagree with them.

Third as someone who was a disk design engineer over 40 years ago...
Cool!
Even before my time! My first hard drives were CDC Hawks and the cool top-loading 40MB 9760 SMD stack-o-platters.
For a while it looked to me like the HDD end was finally approaching, then the GMR heads added new life.

Jim

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Author: RPScissors Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194872 of 211751
Subject: Re: ot: stx Date: 10/16/2012 3:47 AM
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IMHO, the potential game changers that are always around the corner are a serious threat to their moat.

From the WSJ today:
"Pure Storage Inc. won the Silver award for a data-storage system that uses flash memory instead of disk drives to hold information in corporate data centers.

Pure has solved the biggest obstacle to greater adoption by companies of so-called solid-state storage, which stores data electronically instead of on disks: its high cost. The Mountain View, Calif., company did this by using lower-cost flash memory chips, combined with its own software that both improves the performance of the chips and squeezes in more data.

As a result, Pure says, its FlashArray storage systems cost roughly the same as comparable disk storage, while delivering flash's greater speed and efficiency. "It could be a game changer in enterprise storage," says Meera Sampath, an Innovation Awards judge and director of Xerox Research Centre India."

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Author: Goofyhoofy Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203129 of 211751
Subject: Re: ot: stx Date: 7/4/2013 8:32 PM
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Amazon is a perpetual low-margin no-ROE business. Always has been and I assume always will be. Outside the US there is perhaps a negative moat, inside the US a marginal one at best.
I don't see one at all, but then I don't live in the US.


Here's how:

As Competition Wanes, Amazon Cuts Back Discounts

Now, with Borders dead, Barnes & Noble struggling and independent booksellers greatly diminished, for many consumers there is simply no other way to get many books than through Amazon. And for some books, Amazon is, in effect, beginning to raise prices.

Stephen Blake Mettee, chairman of the board of the Independent Book Publishers Association, said that Amazon was simply following in the tradition of any large company that gains control of a market. “You lower your prices until the competition is out of the picture, and then you raise your prices and get your money back,” he said.

http://www.nytimes.com/2013/07/05/business/as-competition-wa...

It's a business based on having the best price, with no barriers to entry and perfect price comparison ability. The sales tax scam is going away. The appearance of "brand loyalty" comes solely from their high sales figures which they are purchasing with their low cost of capital, 1999 style.

Who in their right mind would start up an online bookstore and think they have a chance of competing effectively with Amazon? Apple's iBooks is the only thing close, and Apple really isn't going to run that at a loss to build share, they do it as a service component for their ecosystem. Anyone else anyone can think of ready to plunge into this game?

That's "moat." It might not be perfect, heck, it's probably not even be up to "Coca Cola", but it's pretty good.

Most people won't walk across the mall to price check a WalMart item, now that WalMart has the "low price" reputation, and I suspect the same is true for Amazon. (I also know most people aren't data driven as Jim is, and what's true for him surely isn't for most.)

Can Amazon do this with other segments? No, I don't think they're going to become the garden hose be-all end-all, but surely there are some areas which they can dominate, while running others (i.e. garden hoses) as a service to enhance the reputation of the "sell everything cheap" store.

No, I have no interest in Amazon as an investment. But they are a fascinating business study.

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Author: bigshan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203130 of 211751
Subject: Re: ot: stx Date: 7/4/2013 9:05 PM
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<<Most people won't walk across the mall to price check a WalMart item, now that WalMart has the "low price" reputation, and I suspect the same is true for Amazon. (I also know most people aren't data driven as Jim is, and what's true for him surely isn't for most.) >>

I'm a big fan of Amazon. But the above case is not true online. I frequently check (one click away) on google to make sure there's no lower price somewhere else before buying on Amazon. Amazon's true moat would be their low cost fulfilling and delivering infrastructure and its excellent reputation (if prices equal, Amazon wins).

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Author: Rubic Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203133 of 211751
Subject: Re: ot: stx Date: 7/5/2013 3:02 PM
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Another segment to watch for is the cloud services Amazon provides:

http://gigaom.com/2013/05/29/killer-cloud-report-says-amazon...

We essentially run our entire business on AWS. It's not quite a moat, but the service is very "sticky" and should remain so if Amazon can keep their cloud service prices lower than their competition.

Like Goofy, I have no interest in Amazon as an investment.

-Rubic

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Author: sykesix Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203134 of 211751
Subject: Re: ot: stx Date: 7/5/2013 5:09 PM
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Who in their right mind would start up an online bookstore and think they have a chance of competing effectively with Amazon? Apple's iBooks is the only thing close, and Apple really isn't going to run that at a loss to build share, they do it as a service component for their ecosystem. Anyone else anyone can think of ready to plunge into this game?

That's "moat." It might not be perfect, heck, it's probably not even be up to "Coca Cola", but it's pretty good.

Most people won't walk across the mall to price check a WalMart item, now that WalMart has the "low price" reputation, and I suspect the same is true for Amazon. (I also know most people aren't data driven as Jim is, and what's true for him surely isn't for most.)


Matt Yglesis wrote an interesting article on Amazon:

That's just staggering. It means that Wall Street is on board with an Amazon business strategy that doesn't require it to actually make profits as long as it increases sales volumes. And if you're in any line of business where you compete with Amazon—and Amazon is in a lot of businesses, and seems to get into new ones each year—that should terrify you.

In any line of business where you're earning healthy profits you always need to worry that a competitor will undercut you on price. But normally you can also have some confidence that they'll be restrained in their price cutting by the need to maintain profits of their own. Amazon is totally off the leash in this regard. Wall Street treats it like a brand new startup that just needs to think about growth and can find a viable business model later. Which means that if they come after you, you have no recourse. Your profits are going to shrink, and your investors are going to punish you for it but Amazon's profits don't necessarily need to grow proportionally. They just need to show they can poach your market share.

Be afraid.


http://www.slate.com/blogs/moneybox/2012/10/26/amazon_profit...

Not having pressure to be profitable is a helluva moat. Profits are the reason why everyone else is in business, but AMZN doesn't care about stuff like that.

In the meantime, I find myself getting sucked farther and farther into the Amazon universe. All of the family and most of the friends have wish lists on Amazon, so that makes Christmas shopping a delight. Click, click, click, done! No malls, no fuss. So it made sense to sign up for Amazon Prime and get free shipping. Since shipping is free, I don't really look at other sites for my own online purchases. I just go straight to Amazon.

And Season 3 of Downton Abbey is exclusively streaming on Amazon, so we'll be watching Netflix a little less. Be nice to have a subscription to only one of those, so if Amazon can catch up, we'll be ditching Netflix. Oh, and unlimited cloud storage for all my music...

Like I said, I didn't mean to get sucked into the Amazon universe, it just sort of happened and now I'm in, it is hard to get out. Now as an investment, AMZN seems crazy to me. Amazon's mission is to own the entire universe, but until that happens they don't seem to be particularly interested in making money.

Interesting business model that's for sure.

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Subject: Re: ot: stx Date: 7/6/2013 4:01 PM
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I'm a big fan of Amazon. But the above case is not true online.

I think you mean it's not true online for you. The reality is that you can frequently find a cheaper price for just about anything Amazon sells if you look hard enough. (Just as you can do better than WalMart if you really try.)

But most people don't. Or perhaps not "most" people, but a huge segment seems very apt to "trust" Amazon, with its liberal return policy, customer attention, nearby warehouses, free shipping, Prime plan, etc. etc.

I know when I find something at Amazon, I rarely bother going further. Maybe I could do a smidge better, but I don't have to fill in all the billing and shipping forms, I know I'll get a confirming email, I'll get a tracking number, and the product will be at my house in a day or two. If there's ever a problem they take it back, usually pay the shipping, even credit my account before it gets there.

They have a moat, at least with me, and I'm sure with millions of others, too. It's not perfect, it's not invulnerable, but it's pretty darn good.

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Author: bigshan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203142 of 211751
Subject: Re: ot: stx Date: 7/6/2013 4:31 PM
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<<I know when I find something at Amazon, I rarely bother going further. Maybe I could do a smidge better, but I don't have to fill in all the billing and shipping forms, I know I'll get a confirming email, I'll get a tracking number, and the product will be at my house in a day or two. If there's ever a problem they take it back, usually pay the shipping, even credit my account before it gets there.>>

In retail business, history shows that lower cost and lower price always win. Walmart, Cosco, etc. are the examples. People lining up a few hours to save $100 on black Friday, it's the psychology besides money. Online will be no different. I have been an Amazon prime member for two years and appreciate the 2 days shipping and no-hassle return policy. But I can't resist taking a minute to check out lower price to save some money. I think most people will be willing to spend 2 minutes to save as little as $5-$10. There's no easy return even with Amazon, one still wastes time trying out the product, printing return label, packaging, and going to UPS office. So I (I think most others do as well) did product comparison and read user reviews before buying and don't bother to return it unless it's broken. Amazon does have moat. But it's not clear how that moat will translate to profits because no one has seen it consistently.

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Subject: Re: ot: stx Date: 7/7/2013 2:48 PM
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In retail business, history shows that lower cost and lower price always win.

Coca Cola costs almost twice as much as Sam's Cola, and seems to have larger volumes, even in WalMart stores to boot. I'm sure I could find tons of examples where "always" turns out not to be true. (You can get free OS from Linux and free word processing from Google, but those aren't catching fire, either.)

I don't disagree that "low price" wins most of the time, but if it was "always" - and you want to examine only pure retail merchants, then K-Mart would still be big and Target would be out of business. Since that's not true, there are obviously other dimensions which people value equally or sometimes more than saving a few cents.

Amazon is one of them, at least so far. Will it always be? Nothing is forever, but if they keep spinning their web of satisfaction/price/ease/ubiquity I suspect they will be hard to dislodge for a while.
 


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Author: JeanDavid Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203151 of 211751
Subject: Re: ot: stx Date: 7/7/2013 4:58 PM
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You can get free OS from Linux and free word processing from Google, but those aren't catching fire, either.)

I do not disagree with your post. I do not even disagree with the part I just quoted. But as far as whether free Linux OS or free word processing with Libre Office or Google is catching fire or not is extremely difficult to estimate.

Since these products are not always sold (the free versions), it is difficult to determine the actual usages. If you go here: http://linuxcounter.net/ you can see one attempt. It is not really adequate. Other approaches are not much better.

To add to the confusion, and I am surely not the only one, I pay for the version of Linux I use. So I probably have been counted.

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Author: bigshan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 203153 of 211751
Subject: Re: ot: stx Date: 7/7/2013 5:26 PM
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<<Coca Cola costs almost twice as much as Sam's Cola, and seems to have larger volumes, even in WalMart stores to boot. >>

Why does that have anything to do with retail business?

<<I don't disagree that "low price" wins most of the time, but if it was "always" - and you want to examine only pure retail merchants, then K-Mart would still be big and Target would be out of business.>>

"Always win" doesn't mean other business wouldn't exist. Walgreen prospers for other reasons. But if a business has lower cost structure and can consistently sell merchandises at lower price with profit, it ALWAYS wins. So far, most products sold on Amazon are cheaper than anywhere else, but it has been losing money. If it turns out that Amazon doesn't have lower cost structure to justify lower price, its moat would be much smaller than it seems today no matter how excellent is its reputation. At best it will be like Walgreen, satisfying certain customer needs.

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