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Technology Stocks : WDC/Sandisk Corporation
WDC 181.54+1.1%Dec 26 9:30 AM EST
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To: Sam who wrote (18812)1/30/2001 8:30:50 AM
From: Road Walker  Read Replies (1) of 60323
 
Sam and Steve,

First Sam, I agree with your well presented hypothesis that OEM's over-ordered, then delayed or canceled those orders when a shortage failed to materialize. But that still doesn't explain the sequential quarterly product growth of only 2%. Just because high expectations were not met, it doesn't mean that sales should decline in an OEM segment that is experiencing very rapid growth.

The breakout of sales according to Merrill Lynch:

OEM - 31%
Retail - 50%
Industrial - 19%

If retail at 50% of the business was way up, OEM at 31% of the business would have had to completely die in Q4 to explain the 2% sequential growth. In a category that everyone (retailers, manufacturers and analysts) say is near the top of consumer electronics growth. And I believe that Eli said that the OEM problem didn't surface until December (?).

The only explanation that makes sense to me is that SanDisk lost or walked away from the vast majority of it's low end, low margin OEM business. I think they said that unit sales were down 19% sequentially in Q4, that would make sense with the higher revenue cards increasing and the lower revenue OEM cards falling off a cliff.

I'm looking forward to the 10Q, maybe that will solve part of the mystery.

John
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