To everyone else on this thread I wanted to remind them of the following facts...
1) Sandisk has a small market capitalization of 546 million and the stock price is easily influenced.
2) At least 8.6 million shares are owned by insiders (including those owned by Seagate), while Fidelity owns another 2 million or so. Thus, only 14 million shares are likely to be freely circulating.
3) The company has $134,925,000 in cash and short term investments amounting to $5.40 per share. If you consider the intangible value of the intellectual properties the price-to-book ratio is favorable.
4) No (zero) long term debt.
5) At the time of the secondary offering the fair market value of $28.00 per share was set. Unless the fundamentals have changed since then the stock in currently undervalued.
6) Huge royalty and licensing fees. This amounted to $19,578,00 in fiscal 1997 with an additional several million dollars reported as "deferred revenues". (The company earned more that $1.00 per share in royalties and licensing alone in 1997.)
7) A Patent Warchest. They have tenaciously defended their patent rights. A judgement against LEXAR could lead to even greater licensing revenues. (Recall that SNDK and LEXAR have already been to the bargaining table regarding this matter. The ongoing litigation may be to arbitrate the amount of royalties that will be paid.)
8) Decent profit margins of around 16%. This could increase significantly as production ramps up and sales outpace some of the fixed overhead costs.
9) Rapidly growing sales, revenues and profits.
**~year~***~product sales~***~royalties/licensing~***~gross profits~**
**~1997~****~105,675~*******~19,578~**********~52,973~**
**~1996~****~~89,599~*******~~8,000~**********~38,892~**
**~1995~****~~61,589~*******~~1,250~**********~26,226~**
**~1994~****~~35,378~*******~~~-0-~~**********~~7,304~**
**~1993~****~~20,551~*******~~~-0-~~**********~~1,610~**
(all values expressed in thousands except year)
10) A great product in a great industry. Remember that Sandisk products are already in the shelves of major camera retailers (Ritz Camera (Twin Cities), Wolf Camera (Atlanta)) and incorporated into product lines of most domestic and foreign camera manufacturers.
11) Phenomenal consumer interest (digital photography) that will grow exponentially for the forseeable future. Digital photography is infectious and habit forming.
12) Conservative management. The stock has not been unjustly "hyped" and is currently underappreciated.
This is simply a fantastic company. I thank all of those impatient individuals who were so kind as to sell me their valuable stock at only $22.00 a share. To all others, sit tight and keep the faith. In the words of a successful mutual fund manager..."My favorite holding period is forever."
Countervailing opinions would be greatly appreciated. |
