WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 212.19

+5.9%

Jan 12 3:59 PM EST

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From: Cooters	12/24/2004 9:46:14 AM
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JPM on Sandisk: We remain at the high-end of consensus for 4Q04.We are looking for $0.32 EPS on 25% q/q sales growth to $512.9mm (consensus: $0.27EPS/$498mm). • SanDisk's products occupy 12 of the top 100 positions on Amazon's U.S. electronics best sellers list. SanDisk's memory cards occupy 6 of the top 25 best sellers in the card category on Amazon's German site. European prices appear to be 15 - 25% higher than in the US, possibly owing to currency movement (USD down about 2% v Euro since guidance issued). • We believe SanDisk's MP3 player is selling very well at BestBuy. The first stockouts have been reported and rebates have been removed for the 1GB device. BestBuy and other store checks indicate that camera card unit sales are firm (accelerating this week) but price action is sometimes aggressive; so gross margin upside may be unlikely. We are not seeing strong aftermarket demand for reduced format memory yet. • We visited SanDisk last week. We believe SNDK has strengthened its forecasting process. Management meets once a month to assess "unconstrained" demand, and follows up a week later to develop marketing plans in the context of supply constraints, with a view to maximizing profit/market share. This is encouraging, however the CFO believes European and Asian sell-through data will take 12- months to optimize. • We expect SanDisk to be active at the CES show in January, with retailers planning ahead to next year's holidays. By the 2005 holiday season 2GB Flash should fall to about $100, permitting the move to higher capacityMP3 players and the introduction of solid-state camcorders. We would also expect considerable emphasis on Feature phone applications (driving up attach rate for this new category in 2005) • Reiterate Overweight. At 16.2 times FY05 EPS, we believe the risk-reward profile favors owning SNDK as a short-term trade into the CES show and earnings, and possibly through to the analyst' day event on February 10th.

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