WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 202.39

-7.8%

2:42 PM EST

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To: gerard mangiardi who wrote (13144)	7/20/2000 8:12:07 PM
From: DukeCrow	of 60323

Are their margins really only about 1.5% on product sales? You forgot to tax the royalties 35%. That makes about $13.9 million of the $24.3 million of income attributable to royalties -- about 57%, leaving 43% of income attributable to product sales and interest income. Taking out the interest income, I calculate about 5.4% net margins. Of course, this would mean all operating costs are being assigned to product sales and none to royalties (which are tied directly to R&D and legal expenses). This isn't truly possible, so the actual net margins of the product business should be a little higher. Doing the same calculations I get about 4.8% net margins on products in Q1. That seems about right given product gross margins increased to 31% from 30% sequentially. With product gross margins targeted for 35% sometime down the road, I think SanDisk can reasonably get to about 8% product net margins. Ali

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