Pam, in order not to duplicate the previous responses to your thoughtful questions, I would add only that the likelihood that Samsung is a lower cost producer than FlashVision may be compensated for by the stronger retail presence of SanDisk. It's one thing to produce a flash memory card that's, say 20 percent cheaper than the competition. But if the card must be sold to wholesalers rather than retailers, that 20 percent advantage may evaporate.
You also suggest that Samsung will be able to use MLC in a short time, thereby lowering its costs for high capacity units. This is probably true, but it is also true that Samsung has obtained a license for MLC from SanDisk, which means that Samsung may be paying royalties if they use MLC.
The main uncertainty that is translated into the low price for SanDisk shares still seems to be the perceived weakness in demand throughout the semiconductor industry. Intel, Cisco, National Semi, and others have issued guidance lowering their expected profits in the remainder of this year and into next. The price of SNDK shares, in my view, correlates mainly with this larger part of the semiconductor industry, even though the products and market niches are not comparable. In other words, the perception of problems facing Intel, Texas Instruments, Advanced Micro, etc., are probably a better proxy for SanDisk share price than spot prices of flash memory. Though I would agree that spot prices intuitively should explain profit margins much better than microprocessor or DRAM sales!
Broadly speaking, the whole market is reacting negatively to higher oil prices, lower than expected employment data, and very tepid increases in gross domestic product. These conditions, despite administration claims to the contrary, should persist over the next two months at least, undoubtedly affecting the election outcome. The latest action by the Federal Reserve, moreover, to increase interest rates should pretty much dampen the economy and any possibility of higher overall growth. These conditions will create margin problems for SanDisk by next year, but they will not place SanDisk at a disadvantage to Samsung, given that SanDisk still has to buy some flash units from outside manufacturers.
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