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To: H James Morris who wrote (92572)	1/30/2000 1:09:00 PM
From: Glenn D. Rudolph	Respond to of 164684

SanDisk Corp Inc ? 27 January 2000 (Continued) 2 4Q99 Highlights SanDisk reported 4Q99 EPS of $0.30, soundly beating our and the Consensus estimate by $0.08. Revenues of $82.8 million were up 22.6% QoQ, sharply above our $75.0 million estimate. Gross margins were 38.5%, up 350 basis points QoQ, and above our 37.2% estimate due to higher average selling prices (ASPs) for flash products, increased manufacturing efficiencies and a richer product mix. Gross margins should trend to 39.7% by the end of F00 as the product mix shifts to higher-margin, higher-density flash chips, as average selling price (ASP) declines are moderated, and as manufacturing efficiencies are recognized n 4Q99 Geographic Breakout Geographic breakout was as follows: North America, 61%, up 49% QoQ; Europe, 13% (up 59%); Japan 17% (down 16%); and Asia/Pac, 9% (down 31%). Geographic breakout was skewed greatly due to the company having decided to allocate product to the North American and European retail channels while sharply limiting shipments to Japan and Asia/Pacific. The sequential decline in Japan and Asia/Pacific, however, does not appear to be indicative of the order rates in those regions as demand continues to far outstrip the available supply. This is particularly true for the skyrocketing demand seen for multimedia cards (MMCs) used to store music in digital audio players. The severe shortage of the company?s MMC cards appeared to have delayed the introduction of new MP3 players by Japanese and Asia/Pacific companies. n Product Revenue Breakout Estimated product revenue breakout was as follows: CompactFlash, 64% of product revenues (up from 60.5% QoQ); FlashDisk, 18.2% (down from 20.1% QoQ); MMC, 8.0% (down slightly from 8.2% QoQ); Smart Media, 6% (up from 2% QoQ); and flash chipset, 3.9% (down from 9.4% QoQ). Retail sales comprised 34% of total revenues, with OEM at 56% and industrial distributors at 20% of total revenues. The company?s newest flash form factor, named SecureDigital, should begin sampling early 2Q00 with production late 2Q00. SecureDigital should see a rapid adoption rate once it become available ? ultimately supplanting demand for MMCs in F01 ? due to its higher-security features and greater density, of particular interest to digital audio player suppliers. The demand for flash chipsets is highly customer specific, leading to orders being placed at irregular intervals and having lead to the sharp sequential drop in 4Q99. Lead times continue to be in the 16-18 week range, with the company currently booking orders for shipment in June. n Very Solid Demand for CompactFlash Driving Performance SanDisk experienced explosive demand for its products during 4Q99, with demand for CompactFlash far outstripping the available supply. Digital cameras were the primary source of demand for CompactFlash, with robust demand emanating from OEM, industrial distribution, and retail markets. In addition, the company experienced extremely strong demand for CompactFlash from the retail sector in both the U.S. and Europe. n Faster-than-expected transition to higher-density devices SanDisk bounced back from yield problems in 3Q99 that resulted in a sharp gross margin declines with a faster-than- expected transition to 128Mb and 256Mb products. In fact, combined revenues of 128Mb and 256Mb shipments exceeded 50% of all product revenues during 4Q99, up from only 10% QoQ (the remainder was 64Mb product). This quarter, we look for a 75/25 split between 256Mb and 128Mb product, with a small fraction of 64Mb. n Balance Sheet Summary Cash increased over $120 million QoQ from $139.2 million to $459.5 million as a result of the company?s recent secondary offering. DSO slightly decreased 1.3 days QoQ, from 58.9 days to 57.6. Inventory days rocketed up almost 20 days QoQ, from 42.9 to 63.8, as a result of wafer shipments occurring late in the quarter. Capital expenditures during 4Q99 were $4.1 million, down from $10 million in 3Q99, and depreciation was $1 million, down from $3 million in 3Q99. The company also announced a 2-for-1 stock split for shareholders on record as of February 8, 2000 with the effective date of February 22, 2000. n Raising Estimates for F00, Introducing F01 Estimates We are raising our F00 revenue and EPS estimates from $340.0 million and $1.10 to $465.0 million and $1.40, respectively. We are establishing F01 revenue and EPS estimates of $720.0 million and $1.80, respectively. We are raising our 12-month price objective to $116, or 64.4 times our new F01 EPS estimate.

To: H James Morris who wrote (92572)	1/30/2000 1:32:00 PM
From: GST	Read Replies (2) \| Respond to of 164684

HJ: <Why you mess with gold instead of palladium is beyond me.;-)> I mess with both -- and I don't always know why myself. But every dog has its day -- unless it has fleas and smells like dung -- AMZN? BTW I made my first order from AMZN today -- a book I absolutely had to have next week for an assignment in Vietnam. Wow, the shipping charges are out of this world! Have you ever noticed how Hawaii is not considered part of the US? So there you have it, I did my part to bring down AMZN -- I ordered a bok :)