WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 163.58

+0.2%

3:59 PM EST

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To: Andre Williamson who wrote (21070)	11/1/2001 10:01:11 PM
From: Craig Freeman	Read Replies (1) of 60323

Andre, re: "I'm now confused". Welcome aboard the NASD! My understanding is that SNDK now has the capacity to produce more product than they can sell and that they have invested heavily in production facilities. IF SNDK sales went to zero, SNDK would have to deal with their "inventory" in warehouses PLUS they would have to amortize the costs related to their ability to produce an unwanted product -- including a diminished value for their UUMC shares, similar write-downs related to their Toshiba joint-venture, etc. On the other hand, if SSTI sales went to zero they would have to deal with whatever product they made for non-paying customers and that's about it. SSTI hasn't ever invested in any fabs. If SSTI sales ever went to zero they wouldn't have any overhanging inventory, could easily fire most everone and stay in business until they got their next order or sold out to someone who wanted their patent portfolio. In the past year, SSTI wrote off the ENTIRE cost of any product they produced in "expectation of sales" and also for any product ordered under a firm contract but which later was deemed to be undeliverable. SNDK has done so in only a limited fashion so there may well be more write-downs to follow. So ... when a new SNDK rep calls upon his customer and that customer says to him "Don't send me any more product!", that becomes a "new" and unanticipated writeoff for SNDK. Repeat this scenario and when UUMC gets a call saying "Don't ship!", uuMC shares plummet and thereafter SNDK shares. When a proposed customer for the proposed Toshiba-SNDK joint-venture calls and cancels, SNDK shares lose value. SSTI took a more advanced view at their ability to balance orders and production and kept their productive capacity on the lighter side. As opposed to SNDK who took used the "paper profit" from their UUMC deal and rolled it into Toshiba at the exact moment that their market hit bottom. I could go on and on ... but this is not the SSTI thread and SSTI is not my favorite stock anyway. Craig

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