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Technology Stocks : WDC/Sandisk Corporation
WDC 241.92+8.5%Jan 21 3:59 PM EST
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To: Art Bechhoefer who wrote (24131)12/8/2003 11:39:46 AM
From: Howard R. Hansen  Read Replies (1) of 60323
 
The question is whether the decision to expand now, at a cost of more than $1.8 billion (shared with Toshiba) is reasonable.

I am trying to estimate how much SanDisk revenues will increase after the new fabrication plant Toshiba and SanDisk are building comes on line. One approach to the estimate goes as follows. If SanDisk invests 900 million in the plant and needs a return on investment of at least 15% to justify the investment than the plant needs to make a profit off at least 135 million a year for SanDisk. Next assuming SanDisk's operating margin doesn't change then the increase in revenues should be equal or greater than 135 million divided by .22. This approach estimates the increase in revenues is 614 million. Is this approach reasonable or is there a better method for estimating the increase in revenues from the new fabrication plant.
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