Keith,
I am happy to see you are "out of the closet" about your short position. Most of us are intoxicated with this stock, so we generally post little in the way of unnecessarily disparaging remarks. I think we all agree that the stock has been bid up beyond our wildest expectations, but not as badly as some other stocks I have looked at lately. Take Brocade for example. I read an article about Brocade (Symbol: BRCD) in IBD and thought the idea was interesting. It has a link with photonics and provides a solution for rapid access of the trillions of pages of data stored in SAN's thoughout the digital universe. The stock was listed as trading around $180 dollars, but the day I looked up the ticker price (a few days after the IBD article) it was up over $8.00/share day and trading at $212. That run-up seemed a bit premature for a company with relatively meager revenues, only one quarter of profitability under its belt and less than $100 million in total assets. Granted the potential seems awesome.
I still believe that the IP SNDK possesses as being greatly overlooked. They will earn close to $40 million dollars in royalties this year. Yes, 1999. These earnings have a 100% margin. Then I think about CF and MMC sales. Millions of SNDK cards will be packaged with the products of leading OEM's. I expect that there are extremely healthy margins on these products at the retail level as well. The comparison I like to make involves a $96 CompactFlash card (the "last roll of film you will ever need") and a $96 Zip drive. Think about Iomega's production costs, packaging, marketing, defective equipment recalls, technical support, software conflicts...
Then think about a CF port that costs the OEM a couple of bucks and is totally invisible to the consumer. No software required. No problems with recalls. No cost to SNDK. And add to that the CF card. Packaged in a simple plastic blister in a cardboard box, pretty much indestructible, all drivers included on the card, durable, solid to the touch, under heavy consumer demand, crucial to many new and exciting handheld devices...
Ask yourself, how many companies have directly sold their semiconductors directly to John Q. Public, practically naked (except for a thin layer of plastic), tolerant to the most punishing conditions, compatible with anything that carries a CF slot (plug 'n' play), and totally satisfying to the consumer who comes back looking for a second card. (If you have used a CF card you will know what I mean.)
I also foresee CF becoming an item that is almost a collectible. I would love to have a couple of 8 MB cards for my handheld PC just to store key data (one for maps, one for my language dictionary, one for family photos I love to look at on business trips or show off to the guy sitting next to me on the plane who is also miserable about being away from family). Add to that a high capacity card brimming with some favorite audio files and one for my digital camera which accompanies me on most business jaunts.
I anticipate people will hardly be able to resist owning just one SanDisk product. (I think the "attachment rate" will be much greater than 2:1 as others have suggested.)
I think it is a hell of alot easier being a SNDK long. Just tuck the shares away in your IRA and come back to revisit in a few years.
IMHO, SNDK is a winner. Owning it even makes it difficult to find new companies to invest in. Nobody seems to meet the standard set by this innovative company.
Ausdauer
(A besotted SNDK long) |
