Jason,
If you promise not to show my answers to Aus I promise not to pose your questions to him. :)
I'd like to know how concerned you are about SNDK's ability to maintain margins over the next several years.
I don't want to appear flippant, but I really don't get concerned about that sort of issue until evidence of it becomes apparent. I believe the future of margins lies in SanDisk's ability (or inability) to control a really strong value chain. If it doesn't become really strong there will be no control of it due to the sort of pressures that will probably shrink margins.
My biggest FUD regarding my SNDK investment is that flash will be priced as a commodity down the road, as supply meets demand.
To reiterate my above answer, I'm not concerned though that's not to be mistaken for thinking it can't happen. It can. If the product becomes commoditized it will be a symptom of non-gorilla status, not a cause. In a funny sort of way, if I can spot the symptom early enough I'll know to move on to another investment. I don't pretend to think that all my strong gorilla candidates will become a gorilla; the possibility that some won't ascend to the throne doesn't bother me.
More precisely, do they control the IP and supply enough to become a Gorilla?
A big question. Wish I had the crystal ball. So far, the control of the IP is being confirmed. But the issue of supply is all about control of the value chain. That sort of control is far from the sort of slam dunk that I see in Qualcomm, Gemstar, and Siebel. Not only are there competing flash memories, but there are competing storage formats.
If SNE's Memory Schtick goes the way of the betamax, and a couple other flash "standards" bite the dust, Gorilla-dom is a possiblity, however being a royalty play, or King is more likely.
I agree with your first point but not your last point. If I understand SanDisk better than I apparently understood EMC, the technology is proprietary and open. Rather than becoming a royalty play, it would be a chimp or a monkey. My guess is that if it doesn't become a gorilla, the most likely outcome is that it would become a chimp and quite possibly in a space with no gorilla.
Finally, how much do you factor the potentially exponentially larger MMC market in cell phones will become in your decision to own SNDK?
Of the three primary markets for flash storage (cameras, MP3 players, and cell phones), the one that really excites me is the cell phone. I had to put my binoculars on to see it, but it was there when I decided to invest in SanDisk when the first of their potential tornados started swirling. But I've never taken the time to try and quantify the size of the cell phone market that might inure to SanDisk's benefit. Have you? (I'm getting tired of doing my own due diligence. :)
--Mike Buckley |
