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Technology Stocks : WDC/Sandisk Corporation

WDC 150.29

+8.8%

3:59 PM EDT

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To: Bill Fischofer who wrote (5946)	6/6/1999 9:33:00 AM
From: Mike Buckley	Read Replies (3) of 60323

I agree with Bill about the importance of low-cost/high-margin storage. A few years ago I remember people stressing that Iomega's Zip disks wouldn't become a standard unless they could be bought so inexpensively that people wouldn't bat an eye about giving them to people as a means of transferring data from one person to another, such as from one friend to another. The thinking was that the cost per removable disk would have to be at least as low as $1. In hindsight, I believe that has proven to be correct. I'm not ignoring the fact that using the Internet to transfer data from one person to another at faster and faster speeds somewhat eliminates the need to transfer disks. However, with the current costs of removable storage few people would walk up to a friend at the office and say, "Hey, I've got this neat 75 MB file that your wife will like. Take this disk home and tell her to keep it." I think that's why Iomega has had limited success. In gorilla-game terms, that's one of the reasons Iomega's value chain never developed (and I don't think will develop) to the extent that it supports their Zip and Jazz drives in anything other than some niche markets. I don't know enough about CompactFlash to have an opinion about the prospects for its value chain. Not to be unkind, but what I've seen in the discussion so far about the value chain hasn't been compelling evidence for me. That doesn't mean there's not a great investment potential in SNDK. Even though Iomega didn't achieve more than a teensy weensy bit of their potential, my closed position in that stock remains one of the best investments I've ever made. Had I been more knowledgeable a few years ago of the impact of momentum investors, it's reasonable to think I might have closed my position at a price that would render it STILL the best investment of my investing career. --Mike Buckley

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