". . . WDC profit potential, and the stock price, has nothing to due with raw NAND prices . . ."
WDC wants to have a strong position in the enterprise server market, which is shifting from all hard drives to either hybrid or full solid state drives, such as WDC will be able to furnish from SanDisk. Raw NAND prices do have considerable impact on whether WDC can offer a package as low priced as competing packages, especially the servers coming from Intel. As far as I can determine, SanDisk can make NAND flash memory as cheap as that from Samsung or Intel, and maybe even lower cost, given the rate of exchange for the Japanese yen. This is, in my view, one of the main reasons that WDC wanted to buy SNDK -- very competitive NAND flash units. But if companies like Samsung and Hynix get into a price war, forcing SNDK to drop prices as well, this can't improve profit margins for the combined WDC and SNDK. And that's exactly the kind of scenario I can see happening, which would end up greatly reducing WDC profits after paying all the debt service costs on the new debt.
I just don't like buying into companies with huge debt. Maybe I got spoiled with my Qualcomm investment.
If you don't mind a lot of debt, you could end up owning stocks like Enron and Worldcom, and you doubtless know what happened to them.
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