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Technology Stocks : WDC/Sandisk Corporation
WDC 139.09-0.8%Nov 21 9:30 AM EST
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To: Ausdauer who wrote (3518)7/15/1998 9:31:00 PM
From: Yakov Lurye  Read Replies (1) of 60323
 
Aus,

In general, I agree with your assessment - licensing revenues differentiate SNDK from other flash manufacturers. A word of caution though - we do not have enough information to project the revenue streams forward. Many licensing agreements in this industry are structured in such way that per-unit payments decrease year-to-year or with shipment volumes.

Positive resolution of Lexar litigation could give the stock a big boost, but I think that value of SNDK patents is to a degree built into the current price.

Production numbers do not look too good at the moment. Competition is clearly increasing as witnessed by the 17% quarterly decrease in ASPs (also note that MU had acquired a flash memory company - they are trying to diversify out of DRAM). Considering that SNDK's production GM was 18% (actually 12%, I added 6% attributable to inventory writedowns), another Q like this and SNDK will be selling their products almost at cost.

IMO, statements about 32->64 transition and good yields at Taiwan plant are crucial for evaluating SNDK's prospects. I suspect that analysts and fund managers will remain on the sidelines for a while. Of course, a lot will depend on CC and on the direction of semiconductor sector in general.

Still long SNDK but not inclined to increase my position for now

Good luck,

Y.
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