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

To: Greg h2o who wrote (12584)	7/6/2000 8:56:54 AM
From: Steve Lee	Respond to of 60323

I agree that stocks of companies can reach their peak before the industry reaches its cyclical peak. The argument is at its most valid where a company produces a commodity such as DRAM. The situation with SNDK is not that straightforward. a) Their products - specifically CF, MMC & SD - are in a niche that is growing faster than the chip industry and faster even than the sub industry of Flash RAM. b) Their royalty income makes them less prone to margin erosion We see figures that cell phone demand in China is growing fast. 8 million users. That is a tiny proportion of the population. 2 scenarios exist. Either Flash RAM will come crashing down in price and everyone in the world will soon be able to afford a digital camera, PDA and cellphone. Or prices will remain stable and eventually everyone in the world will own these products. Or somewhere in between those 2 scenarios. Either way, revs from CF, MMC & SD are certain to grow at an immense rate. Plummetting ASP's in 2 or 3 yrs time may be disastrous for foundries, but not for royalty based businesses like SNDK.

To: Greg h2o who wrote (12584)	7/6/2000 6:02:07 PM
From: Art Bechhoefer	Read Replies (4) \| Respond to of 60323

Greg, my point is not to determine if there is a peak in the cycle but simply to show that you don't create a lot of free cash flow unless something is going right. It makes little difference to me as an investor whether the cash comes from manufacturing or royalties. The point is that the cash is there, and that's pretty positive, especially when you compare the situation with other relatively young companies. Art