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Technology Stocks : WDC/Sandisk Corporation
WDC 163.00-0.4%Nov 7 9:30 AM EST

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To: Craig Freeman who wrote (8648)1/11/2000 8:46:00 AM
From: Art Bechhoefer  Read Replies (1) of 60323
 
Re: MemoryStick v CF or SD. When a company like GM makes a decision to use the MemoryStick, there are probably reasons for doing so other than technical features. Maybe GM got a very good deal by agreeing to install Sony equipment in its vehicles, which would translate into higher profit margins and/or more vehicles sold. Cost of the flash memory itself is only a small part of the cost of the appliance using the flash memory. Technical excellence and performance doesn't guarantee a sale when there are other considerations of more importance to the buyer.

A second factor, probably at issue here is mindset. When a big company like GM decides to do business with a supplier, it often leans toward the dominant companies in that particular industry. It's what I call the "stuffed shirt syndrome." Company officials (in big companies, that is) often feel more comfortable with counterparts in similarly big companies. This explains in part why a company like AT&T ended up choosing an outmoded TDMA technology for its digital cellular network, at a time when the more elegant and efficient CDMA had already been developed sufficiently to qualify as an international standard. TDMA was developed by Hughes, which at the time was already a subsidiary of GM. CDMA was developed by a relatively new and unknown company called QUALCOMM. CDMA is at least three times as efficient as TDMA, and its voice quality is far superior to any other competing technology, including the more widely used GSM. It is estimated that within the next five years, CDMA will be the dominant technology in wireless communications.

I mention this example because there are many parallels with the MemoryStick - CF issue, except for one difference. CF is the established format, whereas MS is newer and less well developed. If you compare MS and SD, then both are equally recent, but it seems to me that the physical shape of the two cards ought to favor the smaller SD in the long run, if for no other reason that smaller, less bulky objects eventually cost less to manufacture.

Bottom line - though Sony has marketing muscle, there are too many other large players committed to CF or SD to allow Sony to dominate. Whichever system succeeds, it is likely that SNDK will derive royalties from each.
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