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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Craig Freeman who wrote (6128)	6/23/1999 8:40:00 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Craig, the comparisons with AMD and INTC certainly suggest SNDK is relatively overpriced. The problem here is that AMD and Intel are not really good comparables because (1) they are larger and more established companies and (2) their growth rate is tied to a slower growing, more mature market. A better comparison would be to the price of IOMEGA several years ago, when the Zip drive was just starting to become widely accepted for backup storage. A more recent comparison would be to QUALCOMM, whose earnings growth is tied to royalties, profits from handsets and custom ASICs used in handsets, base stations, and other cellular telephone equipment. Sales per share for the last reporting period were $5.21. Because that period does not reflect recent growth in demand for both CF and MMC products, one might reasonably expect those sales to double during the current year. Using that projection would give you a price to sales ratio of somewhere near 4 or 5, which certainly is better than what you see for Internet or other high flyer issues. Put another way, at current prices you can buy SNDK for about 6 times sales, or about what you would expect for a small company with modest growth and few proprietary products. The patents and their earning potential are what make the difference between an average stock and a real star.