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Non-Tech : The New Iomega '2000' Discussion Group
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To: Cogito who wrote (1458)7/7/1999 9:23:00 AM
From: Ausdauer  Read Replies (1) of 5023
 
Allen,

You stated to Rocky...

Looking at Sandisk's upward climb, I have to wonder. Their main product is flash memory. The average selling prices for flash memory, as well as for the devices which use it, are falling rapidly.

How is Sandisk going to maintain any pricing power going forward? And without pricing power, how are they ever going to justify their high valuations?

I replied...

Royalties from the IP
I should also add volume sales.

I apologize for lecturing, but you stated your question in a disparaging way with "wonderment" (disbelief?) and implications that SanDisk is selling commodity items. I assumed (a reasonable assumption, I believe) that you had done some investigation of their business model before calling Rocky to the carpet. It just raised the hair on the back of my neck a bit.

Also, the fall in prices in the devices using flash memory will only fuel volume sales of removable flash memory, so that argument just doesn't stand up to scrutiny.

Finally, the company doesn't "justify" its high valuation. It is simply a value the market assigns to the promise of a given company. At some point in any small cap high tech company the market valuation is some multiple of the book value. It is a sign of investor's confidence in the growth potential of that company.

Aus
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