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

To: Bargain Hunter who wrote (18662)	1/26/2001 12:09:27 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 60323

Thanks for the info, I am still trying to guess what the next quarter will be, it depends so much on the consumer's mood, that I am not sure if my numbers make sense at all. Zeev

To: Bargain Hunter who wrote (18662)	1/26/2001 12:56:55 PM
From: Ausdauer	Read Replies (3) \| Respond to of 60323

Hunter, Cash I believe SNDK paid $20 million to Tower in Q3. The remaining $55 million will be paid when certain "milestones" are accomplished. One can assume these milestones include secured financing from the Israeli goverment (already announced) and a secured line of credit (just announced), as well as secured interest of other industry partners. I thought Frank Caleroni mentioned a $95 million dollar cash payment to the FlashVision JV this past quarter. This likely accounts for the decrease in cash on the balance sheet. OEM vs. Retail vs. Industrial Revenues I will take whatever criticism people wish to dole out about the "anecdotal evidence" I posted over the holiday season regarding retail business. In the final analysis retail sales, such as those cards sold at BestBuy, Circuit City and Amazon.com, was up 50% Q-over-Q. Thus, I believe our observations were actually correct. During the c.c. Eli mentioned that many retail outlets have "bare shelves" and will likely be reordering, albeit cautiously, once other electronics inventories (such as PC's left unsold from Q4) begin to move. I am not sure of the dynamics of selling down inventories of unrelated items, but some stores must keep a running tally of total inventories within a product group, in this case consumer electronics, before reordering. (It doesn't make sense that you would fail to restock a popular item until less popular items are out the door unless there were more globular budgetary constraints on the store.) Industrial vs. OEM I believe industrial customers are primarily telecom infrastructure players. I don't believe they fall into the OEM group. It was very disappointing to learn that OEM orders at the end of December are what hurt us most during Q4. I and others have complained at what little recognition SanDisk seems to garner via OEM relationships given that most of the flash cards are private labelled with SanDisk mentioned only in fine print on the back side of the cards. Also, I still don't understand how SanDisk is able to manufacture 8 and 16 MB CompactFlash or 4 and 8 MB MultiMedia cards at with a comptetitive cost structure given that virtually all of SanDisk's manufacturing is 256 megabit and going on 512 megabit. Lexar's CEO mentioned the posibility of selling OEM's controllers and forcing them to find card assemblers. I can't see anyone agreeing to those terms. In any case, some OEM's were stuck with an abundance of bundled cards and did not reorder in December. The Lexar earnings warning c.c. implicated Kodak. (Eli tactfully withheld this kind of information.)It is possible that despite the strong holiday digicam sales that certain players lost market share. Kodak is almost certainly one of them. More popular players such as Sony, Fuji Olympus, Nikon and Canon likely eroded Kodak's market share. Thus, if Kodak is a major SanDisk OEM, which I believe is the case, their failure to deliver likely hurt SNDK in Q4. Other contributing OEM's may include second tier MP3 players (I-Jam, Compaq and MiniJam) who bundled 16 and 32 MB MultiMedia Cards with their products. They likely ordered cards in Q2 and Q3 of last year, but then failed to follow through with reorders during Q4 due to competition from players like Rio! Multimedia,... We are in a rut. I think we are in a rut now until SanDisk finds a way to work down its outstanding inventory. Because the majority is reportedly raw materials they should have the freedom to redistribute this flash stockpile over the product line. I hope that the guidance that Eli gave is accurate. It will take upto two quarters to work down the inventory. If things don't turn around it would seem logical that SNDK would reduce future orders for flash from UMC. I would also expect that they would begin paring down UMC shares (if market conditions allow) and shift production needs to FlashVision. I am actually looking forward to this type of transition. Aus