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

To: Ausdauer who wrote (15290)	10/3/2000 5:29:28 PM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Aus, the very nature of the cross licensing agreement means that Hitachi and SanDisk can sell virtually the same products without paying royalties to the other party. A company like Hitachi, which makes its own chips in large quantities, henceforth will compete with SanDisk mainly on the basis of price, rather than on the basis of unique features. Well, there might be a few differences in the two products. Perhaps SNDK still has an edge on the manufacturing process for large capacity units. But essentially, the products to be made by each will be the same. That is why I argue that SanDisk is becoming more like a commodity producer than a producer of a unique product. The difference between the two types is seen in profit margins. If a company sacrifices profit margins for volume at this stage, that may be a good thing. After all, it is desirable to make CF the overwhelming favorite for digital still photography, just as the MMC or SD card should become the standard for small appliances such as cell phones, PDA's and hand held computers, etc. As long as others like Sony try to push for a different standard, it's probably a good idea to dominate the market for CF and MMC. Price cutting and high capacity cards (with more storage capacity than the MemoryStick) should eventually convince consumers to choose the higher capacity, lower cost units. While there is room for three different types of flash memory for cameras, given the explosive growth in demand, the cross licensing agreement between SNDK and Hitachi, together with earlier agreements between SNDK and Toshiba should ensure that CF takes about 70 percent or more of the market. The remaining would be split between SmartMedia and MemoryStick. I've seen some recent reports that Sony now has 25 percent of the digital camera market, but I'm not sure it has anywhere near that penetration for its MemoryStick. Art