Paul, while I think SNDK stock performance looks a lot like Iomega in its heyday, there is a difference between the two. Iomega got caught in vicious competition from companies making similar removable disks with similar, or sometimes better performance/price characteristics. SanDisk has enough patent protection to make it dominate the business for several years. Competition from SmartMedia cards (made typically by Toshiba) is significant, and much of the SmartMedia product is different enough from SanDisk's products to avoid royalties. However, the design of the SmartMedia product, which lacks built-in controller facilities, makes it much less versatile. Once again, the valuation of the company comes down to its patents and how skillfully the company manages its resources.
While the price looks high to some, I think it's still reasonable. However, the other side of the coin is the REST of the market and whether the rest of the market is getting too pricey, given the advent of higher interest rates. Thus, because of overall market conditions, the downside risk on SNDK is obviously greater today than it was last week. |
