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

To: StockHawk who wrote (13086)	7/19/2000 6:07:06 PM
From: Jim Greif	Read Replies (3) \| Respond to of 60323

Guys and Gals, I listened to the conference call. It was very up-beat--for good reason. A 50% suprise is nice indeed. These are my notes. PLEASE UNDERSTAND THAT I MAY NOT HAVE BEEN COMPLETELY ACCURATE. They are only notes. Jim Frank Calderoni – sold over 3 million units in the quarter Average price per megabyte decreased 8 percent. Sales to Japan up to 26 percent of revenues. 66% of sales came from consumer market. Sales thru retail grew 38% -- 28% of revenues. Expect patent royalties to be $17 million or higher for next several quarters Expect expenses to increase as development of higher memory chips continues. Also expect sales and marketing to go up to boost retail market. Net income up 58% over first quarter, less the one-time gain from UMC. Eli Harari – significant increase in sales flash chip set for internet appliances. On allocation with all customers for all products. Major transition from .28 micron to .24 micron technologies. Expect to start production of D2 chips from all three UMC fabs by end of quarter. Yields vary from fab to fab – running 10-15% below previous technology. Expect parity within the quarter. In 4th quarter – flash capacity should be much improved. Global supply for some components is still stretched to limit. Agreements with Toshiba and Matsushita have now been completed. Dominion is proceeding according to schedule. Good progress with SD cards. Palm and Phillips are now board members of SD association. Sony is the only cam corder producer not using SNDK’s card. This is a new market area. Tower will be doing .18 micron. Will not be using as flash memory supplier. Increase in royalties – did not come from any new licensees. Since ruling against Lexar, pace of licensing negotiations with new licensees is picking up. Little progress on Lexar or Mitsubishi. SNDK’s prospects coming holiday season are very good. Lexar – their new statement – the fact that they are designing around patents indicates that they know the severity of the situation. We think that they may be infringing more than one patent. Industrial telecom – growing strongly. Supply constrained. Constrained to certain number of wafers. In existing two fabs, can handle either .28 or .24 microns. Problem is if increase .24, must decrease the other. Collecting significant royalty income from part of market we cannot supply. Two licensees have fixed payments as part of their royalties – those will stop, although volume-related payments will continue. Seagate – estimate slightly in excess of one million shares or less. Q4 allocation – leaning toward supporting top 30 clients rather than trying to support all potential customers. Capacitor constraints – having to redesign boards so that can use a more available capacitor. SST – 80% of their capacity is 2 megabytes or less. Not at all in the same market. Only toshiba, samsung and one other (hitachi?) are the only ones that have capability to produce 256 mg. Output from third fab will be available in September, but no exact date. Already booking into 1st quarter of 2001.

To: StockHawk who wrote (13086)	7/19/2000 6:30:24 PM
From: orkrious	Read Replies (1) \| Respond to of 60323

What a great CC. A few notes: ASP's actually went up during the Q2, caused by a shift to higher capacity cards. The price/MB decreased 8%. I think Eli tries to sandbag the analysts and lowball numbers to give us these nice upside surprises. Despite the fact that royalties this Q were $21 mil, his guidance for the next several quarters is $17 mil. He explained this by saying that there are some licensees for whom their fixed cost component of their license is going to be paid up, so Sandisk is going to lose those. He said that since the Lexar decision, other companies are now willing to negotiate licensing agreements, and hopefully some of these would come online to help offset the loss of the other fixed payments. They are backlogged into Q1 '01. They are on allocation with all customers and all products. Their yields for their new process (.24 micron D2?) are about 10% below their yields on their old process. They expect improvement. Dominion going according to plan. SD developing well. Constrained by wafers in existing two fabs, but upside will come from new fab. Margin guidance for Q3 is 1/2 to 1 percent improvement. The same again for Q4. Most important!!! The last questioner asked the question that I was trying to get in to ask. This is the same question I couldn't believe none of the other so called "analysts" asked: What effect would all of the capacity coming on line have on them? Eli's response was something like: I can't believe how many people don't understand our business. It is crazy. I just listened to the SSTI call saying that 80% of their sales came from 2Mbit flash. We sell 256Mbit flash. Toshiba, Sandsik, Hitatchi, and Samsung are the only companies that make this, and all of the other flash capacity being added isn't going to alleviate the situation. The above aren't Eli's exact words, but it conveys his meaning. Remember it! Great call! Jay