JP Morgan Lowers Read-Rite to Long Term Buy

Analyst William Lewis cites both company-specific concerns and industry trends

JP Morgan lowered its investment rating on Read-Rite Corp. (RDRT ) to long term buy from buy, saying it sees significant sequential second quarter revenue decline for the disk drive equipment compny and loss from operations for its recording head bubsiness. Analyst William Lewis says he is downgrading on company-specific 40GB concerns and industry trends towards fewer components.

Lewis says he believes that the demand for fewer recording heads/drive and share losses from difficult ramp of 40 GB heads are leading to lower revs. Although RDRT announced it had qualified, it shipped 40GB/platter heads to Western Digital and Maxtor Corp. during the first quarter. He suspects that the company had not completely solved its manufacturing issues. He is cutting his calendar year 2002 earnings per share estimate to $0.11 loss on $515 million in revenues from $0.25 a share earnings on $647 million in revenues.

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