John, the markets hate uncertainty, especially when it concerns already depressed technology stocks. Here you have a potentially serious diplomatic incident in China, a softening of demand for flash memory, potential problems between China and Taiwan, which is one of the major fab sites for flash memory wafers--all the ingredients, in short, needed to force down the price of a stock such as SanDisk. On top of that, you have young, inexperienced portfolio managers (they got the job because they work for less) too afraid to make their own decisions that would be markedly different from those of their equally inexperienced colleagues.
Putting all of this in perspective, I do not believe we'll EVER see the price of SNDK at lower levels again, unless all the top managers have heart attacks and the company falls under the influence of the mob. Highly unlikely! As for demand for flash memory, particularly the removable sort, it is highly price elastic. As the price comes down (through gains in efficiency in production as well as improved designs), there will be more and more applications apart from digital photography, music downloads, and hand held computers.
The only risk for SNDK is whether its production costs will remain competitive. With a partner like Toshiba, I think that problem is well taken care of.
The only other risk is political--whether the Administration adopts policies that would be injurious to the tech sector in the long run. The evenly divided Senate has shown enough power to prevent such an eventuality. So I remain optimistic.
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