WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 140.23

-8.9%

Nov 20 3:59 PM EST

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To: Ausdauer who wrote (15225)	10/19/2000 6:42:23 PM
From: Ausdauer	Read Replies (1) of 60323

I have decided to post to myself in an effort to avoid insulting anyone. Ausdauer, you posted... Message 14488426 Will Handspring eventually hurt Palm's hardware sales, which account for more than 90% of its revenues? Michael Mace (Palm's Chief Competitive Officer) admits it will. Palm makes $100 gross profit when it sells a $250 Palm. It gets $12 if the same person buys a Visor, says Merrill Lynch. So why license its OS and open the door to competitors? One word: "Apple". An alternative strategy for SanDisk? I almost wonder is SanDisk is finding itself in the same boat as Palm. I noticed during the c.c. that Eli proudly stated that as a result of the renewed licensing agreements recently announced, Hitachi will use SanDisk's MLC technolgy in their leading edge products in return for flash wafers. It would seem then that SanDisk has "bartered" (the same word that I have used to describe SSTI's licensing strategy) the MLC IP in return for volume considerations. Because CompactFlash does not currently appear to be generating any significant incremental royalty revenues (since no new licensing agreements other than TDK have been announced) it would seem that SanDisk is planning to address near-term capacity issues instead. Every competitor's card that is sold is a lost sale for SanDisk. Production volume seems to be a much more urgent issue these days. And the production quota from Hitachi coupled with the new fabs at UMC and the planned production in Virginia will likely boost SanDisk total MB production substantially in 2001. Until Lexar is defeated and until new CF assembly licensing agreements are made SanDisk appears to be shifting away from its IP licensing strategy (for CF) and adopting newer production-based arrangements like those announced with Hitachi. Since the IP licensing strategy was not described at all during the c.c. and since royalty revenues will be flat in Q4 at $18 million I get the feeling that SanDisk is in a similar situation that Palm is facing. They simply have better per card margins on products sold with a SanDisk label than cards sold by CF competitors who pay no license.* To me this seems an obvious conclusion. [*8MB cards are not included in this argument since they are inherently low margin.] All IMHO, Ausdauer@wherethehellarethecompactflashassemblylicenses.com

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