Good summary, Aus. At these prices, SNDK has got to be a bargain. But it reminds me of QUALCOMM back in late 1993, when the stock reached new highs almost daily, only to fall back to less than half its earlier price for several months. In the case of QCOM, however, they were losing money because of the expenses to develop CDMA both technically as well as politically. They spent a lot on the technology and also on getting CDMA accepted as one of three digital cellular standards. Meanwhile, their cash flow was generated by a very profitable 2-way satellite communication system sold to larger trucking companies. This kept their need for new capital down to lower levels, but they still issued new shares as well as a convertible preferred issue in a private placement. It took really more than four years for QCOM to make investors enthusiastic. All during this period there were attempts to sue QCOM, by companies like Motorola and Ericsson, and there were engineering reports published that told why CDMA would never work and would never dislodge either TDMA or GSM, the two competing systems, which are now growing at less than half the rate for CDMA.
The situation with SanDisk is a little different in the sense that CF and the smaller cards are proven technology. The situation is similar in that both QCOM and SNDK have a good patent portfolio. When QCOM really took off last March, it was because of a favorable settlement on a patent dispute with Ericsson. For both QCOM and SNDK, the issue can be summed up as: "It's the patents, stupid!"
Art |
