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

To: Steve Lee who wrote (15497)	10/11/2000 4:19:15 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Steve, the accounting rules require that you carry the cost of an investment on the balance sheet at the lower of market value or original cost. SanDisk sold some, but not all its UMC shares earlier this year, and took a very substantial profit from the sale during the first quarter. That profit was recorded as a one-time gain on the earnings for the quarter ending March 31. The only change in value of the remaining UMC shares that would show up on the books would occur if those shares are now priced lower than they were originally, back in 1998, I believe, when SNDK purchased them. I doubt very seriously that this is the case. So the value of the remaining UMC shares on the books remains the same until the shares are sold. Perhaps some of those shares were sold during the last quarter. We'll know more next week. If the value of the remaining UMC shares still is much higher than the purchase price, then that increased value will NOT show up on the balance sheet. But if we adjusted the book value of the company for the higher value of those shares, which would be the value if all the company assets were sold, then we would get a pleasant surprise, albeit not as much of a surprise as the addition to value that would come from monetizing the value of the patents. These "off book" or hidden values are what really give a company like SanDisk its intrinsic value. The only reasonable way to value a company like SNDK, in my view, is to take account of these hidden values, and even more important, the CHANGE in these hidden values. That is where shareholder wealth is accounted for. Art