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Technology Stocks : WDC/Sandisk Corporation

WDC 166.10

-2.3%

Nov 12 3:59 PM EST

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To: orkrious who wrote (6357)	7/15/1999 9:51:00 AM
From: Ausdauer	Read Replies (4) of 60323

Jay and Thread, I was taken by surprise regarding earnings (thought they would be 7/15/99) so I had to scramble to get details about the release. I called Investor Relations and Ms. Spehar gave me the c.c. number. I was not near a computer all day yesterday and managed to get away for an hour to listen to the comments Eli and Cindy had regarding the quarter and beyond. I took detailed notes. My take away messages are that MMC is 1 to 2 quarters ahead of anticipated growth with tripling in sales revenues vs. Q1 (6% of total Q2 revenues), a significant backlog of 32 MB MMC orders, anticipated growth in MMC revenues that could cross-over CF revenues (exceed as a percentage of total product revenues) some time in 2000, sixty announced or planned MMC design-ins (including some newer digital cameras), and a potential demand from the mp3 market that could "dwarf" CF sales in the next few years. Wafer is in high demand now and production is consumed almost immediately leading to inventory shortages as I suspected. They are transitioning to 128 Mbit technology with a 50/50 mix of 64Mbit and 128Mbit products in Q3 and a dominant 128 Mbit presence by Q4. There was a substantial gain in royalty and licensing revenues to $10.2 million for the quarter and predicted revenues of $9.0 to $9.5 million per quarter for the next 4 quarters. That will be approximately $1.35 per share annualized. The Lexar suit litigation should conclude in August and a mandatory settlement has been requested by that date. A motion to dismiss Lexar's countersuit is being filed as it is baseless. Another interesting tidbit is that the USIC joint venture may be consolidated with other UMC adventures. If regulatory approval and anti-trust requirements are met SanDisk will have approximately 111 million shares of UMC as a result of the merger. These shares have a paper value of $330 million based on the current share price in Taiwan. Dr. Harari feels that the USIC investment will lead to a several fold increase in the original $51 million dollar start-up costs they invested originally. Finally, the Target national retail stores have been added as SNDK outlets. That is a big shot in the arm. I think this is a very significant quarter especially if you use comps for the comparable 1998 quarter where we had an inventory right off and the most devastating Asian Flu effects. Also, the report clearly surpassed Dr. Harari's predictions based on the Q1 conference call. I see this quarter as a confirmation of the enormous potential of this company. Congrats to all SNDK longs. Ausdauer

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