Hutchinson Technology (HTCH) may return to profitability after implementing a series of cost-reduction measures, and the stock could get closer to its former glory of $25 per share and 55% market share of the suspension-assembly market for data storage, says Mark Miller, Senior Research Analyst at Noble Financial Group, Inc.
“The firm has suffered several years of losses, and its share is down to 22%. Hutchinson used to make $2 a share. The stock is up 50% over the last six or seven months, the thought being that they have made significant cost cuts which, in combination with potential share gains via new programs and higher component counts, could take them to profitability,” Miller said.
The industry is moving toward a new type of suspension called dual-stage actuator, where Hutchinson is growing market share. The industry, Miller says, is also increasing the the drive platter count, and the number of suspensions per drive is increasing accordingly, since areal density growth is falling behind the growth in demand storage.
“These are the opportunities for Hutchinson to get up to this breakeven level of 125 million units in volume without drive shipments growing much. It’s still a very risky stock. Cash is low, but they’ve done a good job conserving it. It’s not for the faint of heart, but it is quite possible they could turn around,” Miller said.
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