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Intevac's Gain Is Likely Komag's Loss

Strong sales numbers from the maker of equipment for disk-drive media show waning need for Komag products.

Good news for


(IVAC) - Get Intevac, Inc. Report

investors may be bad news for




Intevac, a maker of equipment used to make disk-drive media, late Tuesday reported that its fourth-quarter profit more than doubled from the same period in 2005, thanks to an 82% surge in sales.

The news sent the stock soaring, and in recent trading Wednesday, Intevac shares were up $5.85, or 25.92% to $28.42. Shares of Komag, meanwhile, were off -$1.13, or -3.29%, to $33.23, on heavier-than-average volume.

Intevac's net income for the quarter was $21.3 million, or 97 cents a share, up from $9.9 million, or 46 cents a share, for the fourth quarter of 2005. Revenue was $95.9 million, up from $52.7 million in the year-ago period.

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Analysts polled by Thomson Financial were looking for an EPS of 70 cents on revenue of $86.5 million.

Why is that a problem for Komag, a company that makes thin-film media for hard drives?

Analyst David Bailey of Goldman Sachs, which is seeking investment banking business with Komag but does not have an investment banking relationship with Intevac, says it appears that Intevac's sales are up -- at least in part -- as a result of rising purchases by

Hitachi Global Storage Technologies


, a hard-drive maker.

Those purchases indicate that Hitachi is preparing to produce internally more of the media it now buys from Komag. And because Hitachi is Komag's No. 3 customer, accounting for about 22% of revenue, the loss of business is potentially damaging.

Making matters worse is


(STX) - Get Seagate Technology PLC Report

announced intention to satisfy more of its needs for thin-film media in-house. Seagate, the leading maker of hard drives, is also a Komag customer.