SNDK: 7/17/2000; Background Info
Thanks Aus!
Why SanDisk will continue to lag behind other semiconductor stocks.
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I) Imprecision and fickleness by unsophisticated investors and day traitors.
BELIEF: "Flash memory is entering a period of oversupply with severe price erosion. This is the same thing that happened to DRAM and the HDD markets."
REALITY: The flash market has many diverse subsegments and cannot be described fully in one sweeping statement. The flash card market will be energized by tornados in mulitple consumer "megamarkets". Uneducated investors will sell SNDK long before it reaches its peak.
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II) Seagate, a stalwart in the data storage industry, is abandoning SNDK due to a lack of confidence in SanDisk's prospects.
BELIEF: "Seagate is selling at any cost. SanDisk is damaged goods."
REALITY: Seagate is plucking the golden goose. Seagate is damaged goods.
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III) SanDisk is competing in a commodity market.
BELIEF: "Margin erosion and oversupply are coming."
REALITY: "Commoditization" is a desired outcome in any market where an industry leader has successfully promoted an open and proprietary standard.
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IV) SanDisk is limited by offerings targeting consumer-based products, not industrial applications.
BELIEF: "SanDisk caters to 'novelty' consumer markets like digital photography, MP3 players, handheld PC's and cell phones."
REALITY: Digital photography, MP3, handheld computing and cell phones are appealing devices that are disruptive to established standards. They aren't novelties and they aren't going away any time soon. Also, SanDisk has a substantial presence in the high tech industry as well.
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V) Misconceptions and wishful thinking.
BELIEF: "Digital photography will never rival film photography. MP3 will never overcome copyright obstacles."
REALITY: Digital photography rivals film photography and is the ideal medium for photo sharing and paperless archiving of photos; just ask Kodak and Fuji. The RIAA will never overcome MP3 obstacles; just ask Metallica and Sony.
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VI) Alternative technologies supported by industry heavyweights threaten flash memory's very existence.
BELIEF: I'd rather have a miniature spinning hard drive like my desktop has than an expensive piece of black plastic.
REALITY: IBM and Iomega are trying to wring every last nickel out of outdated technology not suited for the Post PC Era. Flash memory is innovative, disruptive, and best suited for any handheld device. Flash memory is the digital currency of the Post PC Era.
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VII) Eli's conservatism is interpreted as sheepishness and a lack of confidence.
BELIEF: "21¢ + 22¢ + 23¢ + 24¢ = 90¢"
REALITY: Eli is a cautious, confident and realistic individual. Revenue and earnings growth will reflect his success or failure in executing SanDisk's business plan and vision.
What, 90¢??? Well, we won't know for sure until July 17, 2000. |
