WDC/Sandisk Corporation Message Board

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Technology Stocks : WDC/Sandisk Corporation

WDC 173.18

-7.5%

11:51 AM EST

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To: Craig Freeman who wrote (3391)	6/26/1998 12:24:00 AM
From: Ausdauer	Read Replies (1) of 60323

IMHO... The royalty agreements are confidential, Craig, but if you go back and look at some of the posts from last summer and fall there are references. IMHO the recent (late 1997 and early 1998) ramp up in royalties has probably occured in concert with lump sum payments for newer technologies such as CF and this is why the Company is vigorously pursuing Lexar. I suspect there will be an ongoing inflow of royalty revenues based on product sales linked to the original licensing agreements. Some of these monies are held in deferred revenues currently and may be liberated as competitors products sell at retail levels. The accountants may not wish to recognize these as revenue until they are certain they need not be refunded, just like they do for sales into the channel. The actual dollar figures have remained stable in the range of $20 to $24 million if I recall correctly from the past two quarterly reports. There is simply no way SNDK could negotiate future royalties if they make their contract negotiations common knowledge. You would never play poker and show someone your hand. You gotta hold your cards close to your chest. The stage is now set for negotiation of MMC cross-licensing fees for 1999. The press release which forewarned of the earnings letdown also indicated that quarterly royalty revenues are slightly down from Q1 which topped $8 million. That means they still could do $25 to $30 million in royalties alone this year. (Just over a dollar a share) Recall that the earnings projections for 1999 has not been beaten down as much as 1998. The analysts must know something about a steady undercurrent of revenues which is pushing the company along, albeit slower than we as investors have hoped.

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