Art, some thoughts
I suspected that their would be consolidation in the industry, and it looks like that may happen sooner than later.
I'm beginning to wonder if the seasonality in the category isn't much more important than previously thought. Most of the products that use memory cards are consumer products, and 50%+ of these types of products are sold (by the retailer) in the 4th quarter. It could be that sales will implode from December through late spring every year. If this is going to be the case with flash cards, it will be an uncomfortable business mix with semiconductor manufacturing. Running fabs and building inventory for a short selling season isn't good, you then have to have very good projections, and you have to include inventory carrying costs into your gross margins. Plus you are always behind the curve, manufacturing cards for inventory at lower densities than will be manufactureable (word?) when the consumer wants to buy the product. Sort of a nightmare, but probably not beyond managing. Would the fab capacity stand idle during the "off-season"?
I agree the relationship with Toshiba is VERY important. SanDisk has to be the low cost producer and lead in density and cost/price reduction if they want to emerge as one of the major players.
Thanks for representing the thread in Q&A.
I'm at a crossroads on if I want to continue to hold this stock. I am impressed with Eli's general management of the company. But from an operations standpoint, especially forecasting and inventory management, he really blew it, albeit in a very tough and unprecedented situation. Much of this business is uncharted waters, you needs a very good operations guy at the helm.
Thanks again,
John |
