Well folks, this former SNDK bull capitulated. I started selling the morning after earnings at 26 and completed my sales today. My fiance' did keep 1/3 of her position. I should have bailed a long time ago.
I bought SNDK because of the royalties, not because I thought they would be a manufacturing powerhouse. I believed that once LEXR was decided, others would fall in line. That hasn't happened. On the CC's, Eli has always said they are negotiating with potential licensees. This time, in response to a question about it, he said something like there are no new people to talk to, the market isn't conducive to people entering the business. To me this means they aren't going to get royalties from any of the other current companies producing CF. I don't understand why, and Eli has always refused to explain it.
I was also disappointed in MMC. Eli essentially said MP3's are dead. (He was unbelievably bullish how many months ago?) Re SD, they are getting design wins, but until there are a lot of new apps that gain widespread use, big sales just aren't going to happen.
So now what do we have? Royalties declining and Samsung about to flood the market. Eli said this is the worst thing that could happen, and when someone asked him if he thought it would happen he said yes. No one is going to make money with the market flooded.
Finally, I find it disturbing the Eli has been so secretive regarding the royalty agreements. Aus posted this from the last CC: Eli refused to comment on about any reported licensing agreements by competitors.
As long as SNDK is dependent on CF cards and Samsung is cranking out supply (these Korean companies don't give a sh*t if they sell at or below cost), SNDK is going to lose money. The market just isn't big enough. As this bear market continues to evolve, I wouldn't be surprised to see us trade down below book, and book is going to go down as SNDK loses money and the value of UMC goes down. I won't be surprised if we trade up into the 30's or 40's in a bear market rally (Zeev may be right on this for October though April 2002) but so be it. I also won't be surprised if SNDK fails to keep up with the market in a rally because Samsung is going to be a problem.
Anyway, not selling in the 100's is probably the biggest financial mistake I'll ever make. I owned a boatload. But I did sell most of my other holdings near highs and I've got plenty of cash for when tech stocks are cheap (they're not).
Jay |
