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Some time ago, I was talking with an engineer at SanDisk and learned that they have close to, if not the highest read, write speeds. If this is still true, then they still have an important competitive edge. As far as their marketing strategy goes, it looks to me like their strategy is to get rid of excess inventory by selling the older, lower capacity flash memories at very low prices through chains like Office Max. This is an area where improvements come quite rapidly, and SanDisk has learned from experience not to get caught with excess supplies. Furthermore, SanDisk has part ownership of a chip plant in Taiwan, which started operating in 1998. That plant keeps improving its products gradually, allowing production of higher and higher capacity chips. Rather than wait till they have something really high capacity, they simply make batches of state-of-the-art chips, hope they can sell them, and then later bring out even higher capacity chips. When I visited the main offices last October, they explained all this to me. They also noted at that time (mid-October), when the stock price was just around 7, they had $5/share cash on hand. So at that time an investor could buy the company for $2 per share. Hey! It doesn't get any better than that! |
