The Memory Market Wishes It Could FOrget the Past Year

Truth be told, the memory market has always had its share of upheaval. It's IT's Wild West or foreign outpost, if you will. A little unpredictable, a little randy and a lot of fun. Or so it was. In a market replete with one-hit wonders, shady miscreants, hangers-on and would-be saviors, some longtime stalwarts remain, such as PDP Systems, which has supplied the channel with DRAM components, memory modules and motherboards since 1985. VARBusiness senior executive editor T.C. Doyle recently caught up with PDP CEO Paul Jones to find out how his company is surviving another turn in DRAM fortunes.

VB: We all know that PC sales have slumped, yet we hear that PC makers have been stocking up. What's going on?
Jones: So you've heard about upheaval in our world?

VB: You can't help it when you talk to white-box makers.
Jones: Well, here's what happened. Supplies peaked in the March and April time frame. Now, supplies are way down. But when the big manufacturers started stocking up on memory, prices soared. They jumped fivefold in five months. The direct guys helped feed the frenzy by stocking up. Everyone expected a rebound, and nobody wanted to get caught without product. Allocation in our business is the worst thing. Unless, of course, you have too much inventory.

VB: And then?
Jones: And then you have a problem. So then people dump product. Here, there and everywhere,including tier-one companies.

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VB: How can you tell they're dumping product?
Jones: When you see original modules coming on the market, which we have of late, you know it's from tier-one and tier-two companies. The Samsung products we now see on the open market are original OEM parts. You see them on the open market.

VB: Here?
Jones: You bet. A major dump in Asia can get here in two days. And that's when you see prices move. And quick.

VB: Give me an idea of how tough the market has been.
Jones: Well, the total worldwide memory market in 2000 was roughly $32 billion. In 2001, it was $11 billion. Roughly.

VB: That helps, but those are awfully big numbers%85
Jones: You want smaller numbers? Try these. A 256-MB module that sold for $500 in early 2001 dropped to just $15 in a 10-month span. I've never seen prices deteriorate so fast. And then it turned around again, up to $75. Products that were only recently $20 are now $25 again.

VB: So this is a good business to be in because%85?
Jones: I wonder myself. Just before its collapse, Enron was considering setting up a business to trade memory futures.

VB: What's your message?
Jones: I think I've made the case that the memory market is volatile. [PDP has been around since 1985, providing memory to all kinds of companies. Today, we're particularly zeroed in on white-box makers and their needs. We'll do around $200 million in sales this year because we provide consistent quality to thousands of customers who depend on us for supply at a reasonable price.

VB: Any regrets?
Jones: Not in memory. It's our job to remember. And the better the recall, the better the ability to survive the market's inevitable rises and falls.

VB: Clever.
Jones: Did I mention we've been around since 1985?