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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Apollo who wrote (10260)	11/13/1999 5:19:00 PM
From: StockHawk	Read Replies (5) \| Respond to of 54805

>> is Sandisk a prince in a fast growing Flash memory arena?, or does it have exclusive rights to a particular design that is widely adopted? Or could it be another Iomega? << Stan, I wonder if it might have something to do with th time of year - just after Halloween - I keep seeing scary references to Iomega <g>. This is my understanding - take it with a big grain of salt: Flash memory does not need power to retain the memory (like RAM does). Flash is used extensively in digital cameras and is also being used in MP3 audio players, PAD devices (like 3 Coms Palm)and some cell phones. Flash memory is a discontinuous innovation and an enabeling technology. Sandisk invented a type of flash memory that they called CompactFlash. As one of my previous posts noted, they have about 120 patents in this area. CompactFlash is their proprietary architecture. However, they license it to others and promote it as an open standard. The licensing has not always been easy. Legal challenges from much larger companies had to be won - and they were: SanDisk signed a deal with Intel Corp. in October 1995 following lengthy legal wrangling, and they were victorious in securing royalty payments from Samsung in 1997. CompactFlash is not the only type of flash memory available. Competing memories include SmartMedia and Sony's MemorySticks. This is from a Consumer Reports article Digital cameras store the images you shoot on a memory card. Most use either a CompactFlash or a SmartMedia card, which come in capacities ranging from 4 megabytes (MB) up to 32 MB for SmartMedia or at least 80 MB for CompactFlash. Some Sony high-resolution cameras use a proprietary storage medium known as a Memory Stick, which comes in capacities ranging from 8 to 32 MB. Some low-resolution Sonys use a conventional floppy disk. ------------------------------ The majority of digital camera manufacturers are using Sandisk's CompactFlash. A noteable holdout has been Olympus. In PC Magazine Online recently this appeared in John Dvorak's on-line column: "The battle between the two flash memory formats for digital cameras seems to be coming to a head or getting more complicated, depending on how you look at it. Sony added its proprietary memory stick to the fray, which I believe will eventually become the Betamax to Compact Flash's VHS. The odd man out may be the little Smart Media card. Agfa is abandoning Smart Media in favor of Compact Flash, and the newest offering from Olympus (the real force behind Smart Media) has two slots, one for Smart Media and the other for Compact Flash. If Olympus eventually bails out, then Smart Media will be dead." October 1999 edition of SmartMoney Magazine had a one page article on flash: The "way to play the explosion in handhelds: companies that make the storage devices for these gadgets. These tiny disks...serve as the film in your digital camera or the audiotape for your MP3 recorder..." "The growth prospects for these minidisks are out of sight." "The most promising product may come from the upstart SanDisk (SNDK) in Sunnyvale, California. With a market cap of just $2.2 billion, SanDisk has managed to fight off larger competitors such as Intel to build a 41 percent market share in the removable storage-device market. ...SanDisk's multimedia card may become the standard for MP3 players." From Semico Research Corporation (Alan Niebel, director of non-volatile memory): "Our research shows that the CompactFlash card market reached sales of $157 million in 1998 and that number is forecasted to grow to $1.8 billion by the year 2003.". The list of devices that will use this is growing at an impressive rate. 1. Digital Cameras 2. Palm devices / handheld PCs 3. MP3 players 4. cell phones -------------------------------- One last item. There has been some discussion about a recent decision by SNDK to build a fab plant with Toshiba. Some see this as a poor strategic decision - the move from intellectual property sales to manufacturing. However, I think it may be similar to the strategy employed by QCOM. QCOM management has said that they went into handset manufacturing to help support the adoption and growth of CDMA. SNDK wants to manufacture CompactFlash for similar reasons, and because the supply has not kept up with demand. Also, I suspect, they saw this as a way to turn a potential competitor (Toshiba) into a partner. OK, I think thats about it for me and SNDK. StockHawk

To: Apollo who wrote (10260)	11/26/1999 11:42:00 PM
From: StockHawk	Respond to of 54805

>> is Sandisk a prince in a fast growing Flash memory arena?, or does it have exclusive rights to a particular design that is widely adopted? << Stan, Of the several questions you posed about SNDK that I have still not fully answered, the one above may be the most interesting. I have been discussing this and other aspects of SNDK with Ausdauer, who is very knowledgeable about SNDK and this is the result: The major divisions as you outline them are... 1. That which is open and not subject to royalties: CompactFlash assembly 2. That which is proprietary and is subject to royalties: raw chipset manufacturing 3. That which may become proprietary and subject to royalties if SNDK is successful in litigation: CompactFlash Note that the pending Lexar patent infringement litigation is central to this royalty stream. 4. That which is technically demanding and likely to be produced by only a few, select manufacturers regardless of proprietary or non-proprietary status: MMC and SecureDigital Memory Cards Note: SNDK has been rather secretive regarding royalties so it is difficult to accurately assess the extent of their patent position. They have more than 120 patents in the flash memory area. Also, while it is always hazardous to predict the outcome of litigation, and while both sides have been claiming victories in the battle, it appears to me that SNDK has the upper hand in the Lexar suit. The resolution of that case could be a watershead event for SNDK. StockHawk PS. Stan, how are the tabulations going? PS 2. Hey tekboy, we miss you.