WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 169.99

-2.4%

Nov 11 3:59 PM EST

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To: Ausdauer who wrote (7957)	11/4/1999 11:32:00 AM
From: NotNeiderhoffer	Read Replies (2) of 60323

Aus, I was at the roadshow lunch on monday at the 21 Club here in NYC. The deal was certainly oversubscribed and frankly I am a little surprised the stock ran this high in the face of it. As you know this deal provides the company with funds to outfit the old IBM DRAM fab with equipment. If memory serves me right Sandisk and Toshiba will both contribute $150 million toward equipment purchases to outfit the fab. In addition, they will both guarantee $250 million ($500 million total) in debt that will be used to buy equipment. This could show up as some sort of off-balance sheet type of liability, I am not sure exactly. They plan to eventually ramp the fab to 100% of capacity and split the production down the middle with both parties taking half. This will allow them to capture part of the gross margin that they lose being fabless. But they will still source some production overseas, although it will yo-yo up and down since the Virginia fab should always run at 100% of capacity with the fabless operations handling the incremental business. In any case it looks like all customers will be on allocation for the foreseeable future and things could stay tight for 2-3 years if you buy into what they were saying at the lunch. As far as the cell phone stuff goes, they talked about the number of handsets that will ship the next few years and of course it is staggering. This could end of being their biggest end market I suppose, as it will dwarf digital cameras. They used an example of the Sony Walkman, which has been one of the most successful consumer products of all time, and has only shipped 250 million units in its lifetime if their data was correct. Cell phone handsets make this number look puny. They think the market potential once these emerging consumer products ramp up the next few years will be in excess of $10 billion. They do not plan to own the whole market but if they can maintain their share they would have the opportunity to put up $3-$4 billion in revenue by 2005ish. The company has a goal to expand gross margins to the 38%-45% range and R&D should stay in the 10%-12% range. Operating margins should come in 16%-20% and you can figure out net margins from there. It will take some time to work toward the uppper end of these ranges. If they execute over the next few years I would think they could at some point earn a multiple of several times sales (on projected '03 or '04 revenue) and 25x-50x earnings forward earnings which gets you to at least a $5-$6 billion market cap despite some compression from current multiples. Arguing valuation in this market is a losers game however. The only thing I can say for sure is that this stock will probably remain volatile despite a little more liquidity in the name. The supply chain is crazy and subject to stupid rumors and I suppose at some point we will hear rumors of Seagate wanting to sell some stock. I think if they execute you people make a lot of money from here. Having trouble seeing a 10-bagger (3-4 years out??) from here but but think you could get a 4-5 bagger within 24-36 months which should give SNDK shareholders a shot at performing in line with the nasdaq composite. LOL! Good luck people and good thread. What happened to that guy that joined Firsthand Funds? Is he too much of a bigshot to post over here? No internet access at Firsthand offices? Or is Landis working him to death? <VBG> NotashareholderyetNeiderhoffer

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