Jay, I heard the entire cc and was able to ask a question, along with others from UBS Warburg, Merrill Lynch, Morgan Stanley, etc. After reading the report and listening to the presentation, I get the impression that things could be a lot worse, and that SNDK made a lot of courageous moves that other companies wouldn't even think of. For one thing, they cut salaries, particularly for those at the upper levels. For another, they transferred card assembly and testing operations to Taiwan and China, where labor costs are much lower. They laid off some employees in this connection.
Harari emphasized that cost cutting comes mainly from better wafer technology, and they will have cut 40% by commercializing their multi-level NAND (double density) chips and another 40% by going from .16 to .13 micron technology, all of which is to happen in 2002. He also noted that SNDK is the only company with a prominent position in all four formats (compact flash, SDMC, SmartMedia, and MemoryStick). They have an agreement with Sony on the second generation of MemoryStick units, and no companies other than Sony and SanDisk are licensed to produce these cards (not Lexar, either). SanDisk claims to have invented the double density chip, moreover, and anyone trying to use that process for making NAND chips (except for Intel, which is already licensed) will have to get a license and pay royalties to SNDK.
I don't have time to go into all the details, but one thing which was quite interesting was that demand was beginning to pick up before September 11. After September 11, sales collapsed, and neither SanDisk nor the companies that buy from SanDisk have ANY IDEA about what will happen now. They made NO PROJECTIONS or estimates of sales for the fourth quarter, which is normally when they do most of their business.
They also have not put the kiosks on the market because they are perfecting them to the point where any customer can use them without any technical assistance. As for the information tags, they have made some samples and have some pilot programs. The need for a national ID is something that could prove very profitable in the future, but at this point Eli thought that there would be a need to make the card more secure, so that no unauthorized person could read or alter any of the information contained in the card.
Finally, looking at the financial statement, more than two-thirds of the third quarter loss was due to the marking down of the value of UMC shares held by SNDK.
Art |
