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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Jason W who wrote (35438)	11/27/2000 10:06:24 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

Jason, If you promise not to show my answers to Aus I promise not to pose your questions to him. :) I'd like to know how concerned you are about SNDK's ability to maintain margins over the next several years. I don't want to appear flippant, but I really don't get concerned about that sort of issue until evidence of it becomes apparent. I believe the future of margins lies in SanDisk's ability (or inability) to control a really strong value chain. If it doesn't become really strong there will be no control of it due to the sort of pressures that will probably shrink margins. My biggest FUD regarding my SNDK investment is that flash will be priced as a commodity down the road, as supply meets demand. To reiterate my above answer, I'm not concerned though that's not to be mistaken for thinking it can't happen. It can. If the product becomes commoditized it will be a symptom of non-gorilla status, not a cause. In a funny sort of way, if I can spot the symptom early enough I'll know to move on to another investment. I don't pretend to think that all my strong gorilla candidates will become a gorilla; the possibility that some won't ascend to the throne doesn't bother me. More precisely, do they control the IP and supply enough to become a Gorilla? A big question. Wish I had the crystal ball. So far, the control of the IP is being confirmed. But the issue of supply is all about control of the value chain. That sort of control is far from the sort of slam dunk that I see in Qualcomm, Gemstar, and Siebel. Not only are there competing flash memories, but there are competing storage formats. If SNE's Memory Schtick goes the way of the betamax, and a couple other flash "standards" bite the dust, Gorilla-dom is a possiblity, however being a royalty play, or King is more likely. I agree with your first point but not your last point. If I understand SanDisk better than I apparently understood EMC, the technology is proprietary and open. Rather than becoming a royalty play, it would be a chimp or a monkey. My guess is that if it doesn't become a gorilla, the most likely outcome is that it would become a chimp and quite possibly in a space with no gorilla. Finally, how much do you factor the potentially exponentially larger MMC market in cell phones will become in your decision to own SNDK? Of the three primary markets for flash storage (cameras, MP3 players, and cell phones), the one that really excites me is the cell phone. I had to put my binoculars on to see it, but it was there when I decided to invest in SanDisk when the first of their potential tornados started swirling. But I've never taken the time to try and quantify the size of the cell phone market that might inure to SanDisk's benefit. Have you? (I'm getting tired of doing my own due diligence. :) --Mike Buckley

To: Jason W who wrote (35438)	11/28/2000 2:36:06 AM
From: techreports	Read Replies (3) \| Respond to of 54805

Jason W, another concern i have about CF is this a mass market product or a niche product? Will investors really want to own a CF stock? I guess if SNDK become a gorilla and just dominates this market and is able to grow earnings at over 30% for the next 10 years or something then yes they will. I expect investors to scream for RMBS shares if RMBS does become the gorilla of SDRAM, DDRRAM, and RDRAM market. OK, how do you explain the underperformance of many companies who would have been called the Gorillas and Kings of their day? Examples: Amdahl, Atari, Borland, Cray, Digital, Iomega, Lotus, Polaroid, MITS, Netscape, Novell, RCA, Teledyne, US Robotics, Xerox, Western Digital, WordStar, Zilog. gorillas don't last forever. Moore does say to watch out for discontinuous innovations that could put the gorilla out of business. Basically, gorilla investing provide a great level of safety, but also nice if not great returns. That's the idea i got anyway. Netscape wasn't a gorilla. Borland and Novell went up against another gorilla named Microsoft. Iomega is somewhat like Apple. Apple is a gorilla. The gorilla of the Mac platform but no one cares. People want to own Microsoft. The gorilla of 90% of computers sold today. CD-Rs is become the most dominate form of portable storage and erases the need for Iomega in my opinion. Plus, just look at IOM revenues and earnings. Not gorilla like. P.S. Could someone tell me which 3 stocks Moore bought recently? They were all pure IP companies i believe. I remember RMBS was one of them..