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

To: Ausdauer who wrote (12355)	6/28/2000 11:30:00 PM
From: wily	Respond to of 60323

Ausdauer, Also, I appreciate your attempts to predict earnings, Wily. I think there are too many variables involved to predict more than 3 or 4 quarters in advance. I am content to invest on fundamentals (like the Palm endorsement) and add as quarterly results become available and further define the trajectory of SanDisk's growth curve. A perfectly reasonable approach. I just put that out there to see if I'm in the right ballpark, and if I'm missing anything important. I think it can also serve as a reference point. For instance, don't you think current royalties as a percentage of total revenues, or perhaps as a percentage of the total market for storage Flash, are probably as good as they are going to get? Percentage-wise? I think a percentage basis is a good way to look at things, because you can begin your estimates for revenue growth by using estimates that are out there for total storage Flash market growth and then figure out whether Sandisk's share will be expanding or contracting or staying the same. So, will the Palm endorsement increase Sandisk royalties on a percentage basis? For 1999, if the storage Flash market was 15% of the total Flash market, then it was 15% of $4.6B, or $.69B. Then Sandisk's license&royalty revs (which were $41.2MM) were 0.2% of that segment. Do you see that percentage increasing? Sandisk's royalty&license revs were a whopping 43% of their operating profits in '99! The other big factor I see is margin on product sales. Seems to me like 26% is pretty fat. Can it get better? I think we can assume that Sandisk will be able to sell all the Flash it can make for the next 2 years, so it remains only to predict royalties and product margins and perhaps keep an eye out for extra costs. I understand the need for analysis at a sub-fundamental level, but I think you also need to try to convert these into numbers, and for this you need a reference point with arrows going either up or down into the future. wily