WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 176.87

-2.4%

Dec 22 3:59 PM EST

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From: Pam	6/14/2006 8:18:06 PM
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UBS Upgrade finance.messages.yahoo.com Upgrading to Buy 2; Reiterating $70 Target ! Upgrading to Buy 2 on positive fundamentals and new apps Our upgrade of SNDK stems from firming trends in the NAND spot market and our checks that suggest new NAND applications will launch in 2H06 and support ongoing NAND pricing strength. In addition to indirect benefit from new MP3/PMPs and new ultra portables with hybrid and SSD NAND storage, we expect SNDK to directly benefit from 2H06 multimedia handset uptake. ! Industry supply and demand appear balanced Based on a potential for elasticity to drive 95% demand bit growth in DSCs in 2006, 246% in USB drives, and an even more powerful 312% in MP3/PMPs, and the likely emergence of new/stronger handset and notebook demand drivers, UBS believes NAND supply is well matched to 2006/07 net demand. Net, we believe 1H06 conditions pre-new SSD apps are similar to 1H05 pre-nano. ! NAND spot & retail pricing still stable in June, contract up Overall blended NAND spot pricing in 1H June was down -1.5% m/m and supports our view that pricing erosion has abated. Contract pricing is up 5% in June with retail down -24% QTD. This healthy pricing activity sets the stage for improving fundamentals through year-end 2006. ! Valuation: Upgrade to Buy 2 from Neutral 2; $70 Price Target Our $70 price target is based on approx 28x our options burdened C2007E EPS of $2.50. We assign a 2 predictability level owing to uncertainties in consumer demand and competition from new rivals.

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