I stand corrected - good catch. Obviously, the figures are rough but they give us some approximation of the royalty rate.
Yes, I understand the 10-Q disclosure, but if you listen to Harari, he repeatedly will say that he wants to gain market share. The reason is apparent - 30% margins on manufacturing v. 4% or so royalty rate; he believes that his technological prowess is ahead of the curve. What distinguishes SNDK from the QCOM handset division is that QCOM only had a tiny market share and lacked economies of scale.
Yes, I worry every day that this market will become commoditized, just as I worry that internet storage and 3G will displace the need for high density flash memory. Why am I heavy into SNDK nonetheless? It's a valuation question answered by your previous post. The handset business is approx. 400 million units per year and growing. The PDA, MP3 player, and digital camera business, however, is a tiny fraction of that. Last year, maybe 4 million digital cameras were sold - currently, 5% of Americans own one v. 80% who own conventional ones.
These markets are in their infancies and are set to explode. I am calculating the demand will outstrip supply for at least 5 years - somewhere along the way, I'm out.
Also, if SNDK prevails against LEXR in the litigation, they may very well pull a RMBS or QCOM and spin off the manufacturing components of the business.
In my view, SNDK is grossly undervalued even were their products to become commoditized. I do fear products such as FLSH's disk-on-a-chip, but I also think that battle is a little ways out. |
