An Iceberg That Just Might Sinkby
Bulls and bears are jousting over Storage Technology, which so far has pleased the bulls. The stock is at 36, up from 23 in mid-May. Bulls see it boiling to 50. No way, assert the bears, who predict it will plunge to 15. What's the big fight about?
It's mainly about Iceberg. No, that's nothing to do with chunks of glaciers. Storage Tech makes high-performance subsystems for storing and retrieving computer information on disk and tape, mainly for mainframe and midrange systems. Storage Tech is counting heavily on Iceberg--a new product it describes as an array of independent disks designed to slash the cost of managing a disk-storage subsystem.
But Mike Murphy, editor of the Overpriced Stock Service, believes Storage Tech is now discounting Iceberg in a big way because of a rival IBM product. If that's so, says Murphy, Storage Tech "will have a real profit-margin problem."
Another big bear on the stock agrees. For 1994 and 1995, he sees earnings way below the Street's expectations. For 1994, he expects $1.22 to $1.36 a share, vs. analysts' average of $1.71. For 1995, this bear expects $2.50 vs. the Street's $3.44 to $4.25. "Price competition has been beating up the industry, and Storage Tech is losing ground significantly," he argues. A spokesman insists that the company hasn't done any "extreme discounting."