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I've been wondering how to play the Win 2K upgrade cycle.

I considered the box makers, but the two pure plays at that end of the market, Compaq and Dell, seem to be embroiled in a market share war and are cutting margins. Falling margins will dilute the impact of the upgrade cycle. I also have a hunch that Dell's foray into consumer grade PCs is a huge mistake and the cost of supporting the typical retail customer will eat Dell alive.

I'm not touching MSFT until the judge speaks.

INTC hit a wall in production last fall. Backstairs talk is that INTC has committed to filling all orders from their tier 1 customers, even if they have to short ship to tier 2 customers to do it. Zero sum game for INTC.

Looking at the HD producers. Maxtor is focused on the low end market, and their gross margin is still falling. Seagate is spread from the cheapest home PC to high end servers, but their gross margin is also still falling.

HDD products seem to be skewed toward the high end, where Win 2K is aimed, and their margins are rising. HDD looks to be the best Win 2K play.


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