WDC/Sandisk Corporation Message Board

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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: Suma who wrote (17893)	1/3/2001 6:21:38 PM
From: Ausdauer	Read Replies (2) of 60323

It may be the best seller but for me it is my worst loser.... Suma, regarding the Amazon sales, I don't want to overinterpret the sales trends, but to demonstrate that flash cards themselves and the consumer devices they go into remain hot at the Amazon site. I am not sure the same trend is exhibited at retail or even on other e-tail sites that sell to a similar audience. The ML report that tanked us casts a different light on flash card sales. The excerpts that I have seen indicate that ML is anticipating significant decreases on raw material costs (flash chips) that will drive down competitors' pricing structure and reduce SanDisk's gross product margins since most of SNDK's NOR flash comes from UMC and is not bought on the spot market. Similarly, the profitability of the JV with Toshiba could be harmed by competitive pricing by Hitachi, Samsung, Intel... Recall that SanDisk did negotiate favorable pricing for flash chips from Hitachi after the licensing arrangements were renewed this Fall. Thus, some of SanDisk's product will also be manufactured on a lower cost basis. The same may be true for flash purchased from the Toshiba Yoccaichi fab via whatever arrangements were made prior to Dominion's opening. One factor that has been discounted is whether SanDisk will be getting CF royalties for every competing card that is sold. The fall in component prices could lead to affordability of flash cards for an increasingly larger number of electronics consumers. The potential royalties for SanDisk could counterbalance falling product gross margins. This is why it is so critical that Eli and his licensing team spell out what arrangements have been made. So far there has been no information released by SanDisk to neutralize the negative comments by Merrill Lynch. Aus

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