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Technology Stocks : WDC/Sandisk Corporation

WDC 168.90

+4.9%

Dec 5 9:30 AM EST

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To: Tumbleweed who wrote (8422)	12/15/1999 9:18:00 AM
From: Ausdauer	Read Replies (1) of 60323

Joe, The big wreckage in the today's market was in the semiconductor area. It was precipitated by Selectron, a contract manufacturer that "made the number" even though revenues were light and the balance sheet showed signs of deterioration, including a huge jump in inventories... An interesting point you are making. It was in the cards (no pun intended) that spot shortages of various components (flash memory, LCD displays,...) were going to gum up the works. Perhaps the contract assemblers were most impacted as they could have inventories of more commoditized parts, but shortages of key components that are "on allocation". Allocated items and the resultant break in the supply chain could potentially put the brakes on orders of easily obtainable parts. I am not sure if this has been problematic for Xilinx. In this regard SanDisk is probably in a reasonably good position as their cards are not internal components, but bundled items. Also, because the product line is less diversified (usually a disadvantage), SanDisk has (IMHO) an across the board production "problem". As Sam and others have stated, it is not necessarily the worst problem to have your production capacity exceeded as long as you can remedy the problem before other suppliers grab your market share. And it beats an inventory write off (recall Q3 1998) hands down. Ausdauer

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