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Technology Stocks : Flash Memory - Players & Prospects -- Ignore unavailable to you. Want to Upgrade?

To: hueyone who wrote (27)	1/19/2001 7:18:36 AM
From: Ausdauer	Read Replies (1) \| Respond to of 50

How do you distinguish between the SST/Vanguard agreement (or other SST foundry agreements) and the Toshiba/Sandisk Flash Vision, LLC agreement? There appears to be relatively little difference. Recall, however, that Toshiba is a foundry partner that is bringing substantial expertise in NAND flash memory design and manufacture that will expand SNDK's presence into newer markets. The FlashVision JV was also announced in September of 1999, far in advance of the anticipated boom in flash memory demand. It is slated to go on-line slightly ahead of schedule. SanDisk did a secondary to help finance this project. My understanding is that the planned Vanguard flash memory undertaking will cost $2.0 billion to finance. I suspect that SSTI will go ahead with an add-on public offering to finance this undertaking. This probably would have happened by now if the tech meltdown had not occured. I suspect that more details of the SSTI/Vanguard deal will be announced at the SSTI conference call. SNDK and SSTI share other similarities. Both SSTI and SNDK had severe sell-offs in December/January. SSTI was down to a forward PE of 3 while at its recent low, while around the same time SNDK's PE was down to 16 based on published EPS estimates for 2001 for both companies. Congrats on those who took advantage of the opportunity. I was huddled down in a bunker eating canned peas at the time. Aus

To: hueyone who wrote (27)	1/19/2001 9:14:51 AM
From: Ausdauer	Respond to of 50

There is no evidence that Sandisk has more "control" over its manufacturing than SSTI does. How do you distinguish between the SST/Vanguard agreement (or other SST foundry agreements) and the Toshiba/Sandisk Flash Vision, LLC agreement? I think SNDK and SSTI have both been successful with their approach to manufacturing thus far. The major difference between the companies to date has been that SNDK has licensed their flash technology in return for others' technology plus a net positive royalty schedule. Until the Fall of 2000, to my knowledge, SNDK has never licensed technology in return for production considerations. The one exception has been Hitachi's renewal of binary flash licenses with SNDK and additional new cross-licensing of MLC patents. SanDisk made arrangements in this case for the purchase of leading-edge flash from Hitachi which will be qualified before it can be worked into SanDisk's product line. (The same qualification will be needed for the new NAND and NAND-MLC products.) SanDisk's position has been licensure in return for a licensing fee plus a technology exchange. Presumably in order to control quality of the flash product (and to simplify assembly), SNDK has relied on a fabless arrangement with UMC for their ultra-high density NOR flash. I am not aware of any other external sources of SNDK's flash. I expect royalty revenues to reach $30 million for Q4 of 2000. With upcoming purchasing agreements with Hitachi and product availability from the FlashVision JV, SanDisk will be able to produce more flash cards and boost product revenues. The licensing strategy, while relatively immune to pricing pressures, limits their current production capacity and therefore limits potential gains from manufacturing. SSTI has used taken the opposite approach, first emphasizing manufacturing during a period of stable pricing, then going after licenses. The licensing portion of their business model will improve in 2001 according to the CFO, but as a portion of total revenues will remain relatively small. All IMHO. Aus Both models have been used successfully. It is my hope that as flash production as a whole ramps up in the next 12 to 36 months, SanDisk's licensing agreements will become increasingly more valuable.