Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Paul Senior who wrote (7607)	10/13/1999 11:12:00 PM
From: rll	Read Replies (1) \| Respond to of 60323

"Volatile stock or not, buying opportunity or not, for me, it is shocking and dismaying to see such drastic price drops." Paul, Me too! I think that Sandisk is a victim of their own success. They are against cut-throat competition for raw materials which are in short supply (due in part to their own products). Yes, the earthquake didn't help that either. So what can Sandisk do to assure themselves the silicon needed for future growth in these MEGA-Markets? Well, they probably needed a controlling interest in a fab facility. They have also teamed up with the "big boys" for higher density wafers to keep them abreast of fab technology without bearing all the risk. Unfortunately, the other side of the coin is that Sandisk loses some of it's proprietary controller technology in return. It seems to me that Sandisk is making the right moves for the future, although it definitely "hurts" now. rll

To: Paul Senior who wrote (7607)	10/14/1999 8:56:00 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Paul Senior and Thread: A couple of additional thoughts. If you look at the diluted earnings per share, you will see that they already incorporate the proposed issue of 3 million shares, even though it is apparent from the conference call that those shares are not yet on the market. Put another way, the market is reacting to (and the earnings already reflect) those additional shares. As to WHETHER those shares will be issued in the near future, my guess is that they will be parceled out in little bits and pieces if there is a recovery in share price, perhaps into the 50's. The alternative (which in my view would be advantageous to the company and all its shareholders) would involve a private placement of convertible preferred shares (thereby eliminating the need for and expense of formal registration). The shares would be exchangeable for common at some reasonably attainable price, such as $90, thereby avoiding the earnings dilution that is currently shown on the books. I'm sure that management is taking a hard look at the extent to which cash flow currently being generated can cover their research and development costs as well as their investment in new plant and equipment. This company has a very strong balance sheet, featuring, among other things, NO LONG TERM DEBT. The alternatives open to them are many and are appealing. As for the stock price, the kind of selling which would drop the price that fast is only partly due to misconceptions by speculators. Perhaps the more cogent reason is margin calls. Anyone whose portfolio was heavy in SanDisk, and margined besides, would have faced the possibility of margin calls. When these occur, a broker does not have to wait for authorization from the client, but can sell whatever is in the account in order to meet the margin requirements. This kind of selling pressure adds to the earlier momentum. One way to reduce the impact of speculation on ANY stocks, not just SanDisk, would be to INCREASE the margin requirements when the overall markets trade above their historic average (in terms of price-earnings ratios, price to book value, etc.). This, in my opinion, would go a long way toward stabilizing price fluctuations and make life a lot easier for individual investors. The government shows no signs of using this easy mechanism to regulate speculation, but instead threatens to raise interest rates - like using an axe to cut paper. Art