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

To: Sam who wrote (8990)	1/30/2000 7:16:00 PM
From: Ausdauer	Respond to of 60323

Sam and Thread, That is, to my mind, the only issue that could derail Sandisk's success. Commoditization. It is impossible to tell for sure when it might occur. It doesn't mean that profit is impossible--for example, Samsung is making good money on DRAMs now... First, I was very impressed by Derek's knowledge of SDMC. I think it is worth noting that nobody (to my knowlege) has announced that they will be producing MMC or SDMC in any significant quantity aside from SanDisk and Toshiba. Having said that, the MMCA serves the parallel function of the CFA in promoting the MMC standard. Thus, it seems likely that others will arrive on the scene shortly. In fact, I asked Eli during one of the conference calls whether or not second sources for MMC will come out of the woodwork and create a similar environment as now exists with CF (whereby a flock of CF assemblers came in to crowd the CF market). He said (kind of irritated by the question, I recall): "Well of course, MMC is an open standard." I believe that Eli is of the opinion that the open standard creates the motivation for competitors to work on the singular goal of advancing the standard. This prevents the stagnation of the advancement of the final product. It drives price down. It also prevents the innovator from becoming too complacent, as licensing fees are not guaranteed. But capacity and functionality (copyright security, write speed, wear management) continue to increase in complexity while form factors continue to decrease. As a result, there will be competitors that fall by the wayside. It is a purely Darwinian concept. SanDisk has a head start in that it continues to push the leading edge with its increases in capacity while at the same time having great insight into the interests of the OEM's. The serialization feature of MMC is one example where this comes into play. Also, as layers of complexity are added the potential for writing new patents and capitalizing on R&D expense exists. This insight is gained primarily by the group that identifies and solves individual conlicts/problems first. Additional examples may be the application of the wear leveling technology that SanDisk developed earlier to newer MLC technology or the development of newer controllers to augment write speed while at the same time incorporating MLC technology and copyright protection. In fact, Eli was very pleased to report that SanDisk has made great strides in controller technology that is highly competitive. They just haven't been "honking their horn" like some of their competitors have. Second, I think the notion of complete market domination and an iron-clad intellectual property portfolio is not what industry as a whole looks favorably upon. I think some of this sentiment is relected in the Rambus post that Binx submitted. Also, the press that Microsoft has had the past 6 months is not terribly flattering. Message 12722932 A comprehensive, all-encompassing IP is like digging a moat ten miles wide around your castle. It probably offers you a lot of protection, but it also gives outsiders the sense that you are secretive, defensive, hostile and isolated. In fact, it makes detracts from the value of your castle, as you have essentially turned it from a grand architectural spectacle to be visited and admired into a lonely dungeon far in the distance circled by sharks. This is the point I was trying to make in my G&K posts last summer. An open and proprietary arrangement is good for the person with owning the IP, but not so great for the industry ...or the consumer for that matter. An open and non-proprietary arrangement seems to be good for OEM's and consumers. The benefit to the innovator is less certain. Respectfully, Ausdauer