SNDK - Gorilla Potential:
Stan,
A while back I posted some information on SNDK here and you followed-up with some annoyingly good questions <g>. Forgive me, I don't have the link to your post with those questions, but I have been working on some answers.
What follow was largely provided to me by Ausdauer, who follows SNDK quite carefully.
Intellectual property rights to enabling hardware:
Key enabling technology for basic chipsets that has been previously negotiated currently represents about $40 million per year. It is not known if this will increase proportionally with an upswing in manufacturing by licensees due to the concealed nature of the agreements.
Ongoing litigation regarding "card assembly" deals with integration of basic flash storage with intelligent controllers. This technology "enables" the CompactFlash product. Successful litigation by SanDisk may lead to royalty payments on CompactFlash card units by individual manufacturers.
Switching costs by OEMs, consumers
The switching costs are inherently low to OEM's at the present time. In part that is why CF has been adopted so rapidly.
The wide acceptance of CF provides a barrier to non-flash memory alternatives. For example, switching to Iomega Clik! or other non-compatible storage places a lack of compatibility on the consumer. Thus, the failure of Clik! in the marketplace even though per MB costs are lower.
Naturally, as CF and other flash solutions become more and more popular OEM's will be afraid to move away for fear of alienating consumers accustomed to the CF standard. That is to say, to produce a digital camera without a CF slot will be like producing a desktop PC without a CD ROM bay. Few will buy it.
One trick pony?
That's a trick question. Lets remember that laser-like focus on one market segment is a desireable trait for a gorilla candidate unless they are selling into the consumer market. Flash memory is SNDK's only field of endeavor but their flash does, and will, come in a variety of shapes and sizes, both removable and embedded. Indeed markets for flash memory devices is becoming more and more diverse. Also, flash memory is being accepted in a variety of consumer markets. Digital cameras was the first, and is the largest. Other important market segments include PDAs, advanced cell phones, MP3 players and other devices.
Market share now in and in future:
I have not had a chance to delve into the market share issue and it will be difficult to define due to the different market segments and the alternatives in them. However, it would appear that SanDisk is creating an impressive reputation as a high quality flash memory designer, manufacturer and supplier. Further, if the SanDisk/Toshiba Joint Venture procedes one can assume they will have a substantial portion of the industrial and consumer markets as the J.V. represents the marriage of two of the strongest leaders in the flash memory arena. This is not to say that other manufacturers such as Hitachi and Samsung, as well as smaller flash memory houses, will just roll over, but the J.V. of two leaders should be formidible.
Also, in the near term, market share will likely be directly proportional to manufacturing capacity. At the present time there is a severe shortage of flash memory and with the explosive growth of the products in the consumer market, this condition should persist for some time. You may recall that I posted previously that SNDK has been in the postion of selling out their entire quarter's capacity before the quarter begins. This backlog scenario seems to be increasing.
Again, my thanks to Ausdauer, who did most of the "brain work" here in helping put this together.
Oh, and Stan, I can't wait until you make your next gorilla case here so that I can be the one asking the tough questions. <eg> (that means 'evil grin')
StockHawk |
