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To: Cardin Drake who wrote (10550)	4/20/2000 6:31:00 PM
From: Ausdauer	Read Replies (1) \| Respond to of 60323

Cardin, At a conservative growth rate of 35%, we are looking at product revenues in Q3 of 177M and 239M in Q4. You spent some time with your analysis. Your revenue projections seem very, very bullish (read unrealistic). Also, I see EPS at $1.40+ as extremely optimistic. Conversely, I feel $1.00 a share is overly pessimistic given we just witnessed at $0.21 Q1 fully-diluted. Adding together and dividing by two I see earnings or $1.20 this year as "doable" and realistic. I am making current purchases on the risky assumption that the progress made in legal matters will lead to previously uncalculated licensing fees in 2001 or 2002. I am willing to assume this risk and am comfortable with it. I also realize that the company will not comment on ongoing legal issues and that any licensing agreements will be kept close to the chest. Thus, any additional royalty or licensing revenues will not be telegraphed until they are safe in the SNDK coffers. That may not be until next year or even 2002 in a worst case scenario. I believe Lexar will have a difficult time in US Patent Court and that invalidating the '987 places a large burden on Lexar both in the form of legal fees and commitment of engineering talent. I also believe that the planned IPO will force the hand of Lexar to settle. A jury trial jeopardizes the very existence of this company. And without taking the company public I don't see how Lexar will be able to finance the needed growth in the upcoming quarters. All of this is 100% conjecture, of course. Ausdauer

To: Cardin Drake who wrote (10550)	4/20/2000 8:41:00 PM
From: A.J. Mullen	Read Replies (2) \| Respond to of 60323

I am hopelessly confused here. I know something of mathematics but nothing of accounting. First, if the product gross margins are 30% and the product revenues were $97.2 million, why doesn't that give $29.16 million to the bottom line? That seems how you have calculated quarters 3 and 4. Excluding one time sales, they've reported net income of only 15.3 - and that includes $12.1 million of licence fees. Admitting that I don't know what I am doing, I'd like to run through some numbers and take issue with a couple of yours. Please bear with me and tell me where I am wrong. The year on year increase in revenues were 171%. That is the compound annual rate, that translates coincidentally into a simple rate of 100% (the log of 2.71 is 1.00), and this gives a quarterly compound rate of 28% (exp(0.25)-1). Using method for royalties gives an annual compound rate of log(1212/821) of 39% which gives in turn a quartely compound rate of 10%. Thus Product revenue Prod Prof (30%) Royalties Total Q1 97.2 29 8.2 37!!! Q2 124.8 37 9.0 46 Q3 160.3 48 10.0 58 Q4 205.8 62 11.0 73 Year 214 This would give an eps of 2.93 (214/73)! Ok, it must be wrong because it gives Q EPS of (37/73) 0.51. I suspect it is in my naive assumption that gross margin x product revenue = earning. There must be some cost in collecting royalties too. I went through the numbers in a similar way to you, Cardin, but with the lower growth rate on Product Revenue. Would you, or anyone, like to enlighten me as to what I (we?) did wrong? Thanks, AJ