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

To: Steve 667 who wrote (18813)	1/29/2001 7:41:51 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 60323

I don't think it is really that bad. The differential in inventories between last quarter and this quarter is $27 MM. As I have said before, whatever is on the shelves at retailer is considered SNDK's inventory since they do not recognize sales until it got off the shelf and the hand of a consumer. Since the last quarter includes at least the last two weeks before January first, I would not be surprised to see that a lot of this inventory actually got sold but not reported yet as revenues by SNDK.I would say that 2/3 of the increase (about $18 MM) is such shelves inventories. That leaves us with a true increase in inventories of $9 MM which indeed can be due to OEM slowing down their own ordering and SNDK not reacting in time. I doubt this is catastrophic. I expect to see a weaker quarter, as I mentioned before, but something of the order of $10 MM or so less shipments than this quarter. The big hit to the bottom line, however, will still be, IMHO, the decrease of some $5 MM in royalties. Zeev

To: Steve 667 who wrote (18813)	1/29/2001 9:19:06 PM
From: Ausdauer	Respond to of 60323

"The value in selling to OEM is really to get your product into the hand of the consumer. If you get your card and promotional material included with a camera that is sold, that consumer is more likely to buy your product when he goes to get a higher capacity card. So from that perspective it is almost worth it to sell them close to cost!" Some people are talked into an extra card at the point of sale. I suspect many cards are sold even before the consumer opens the box. Kodak, Nikon and Canon all stuck private labels over SanDisk's label. There is no way a consumer of these products would develop any brand preference for a flash card with this setup. Right now many consumers are buying flash cards on a $ per megabyte basis. When cost is the only feature that distinguishes two brands then that item is, by definition, a commodity. Sad, but true. The fact that CompactFlash is a commodity doesn't upset me. It is just that Eli and his legal team haven't gotten their act together to benefit from the ramp up in CF card sales. If they had their "stuff" together they would have been pleased to announce new licensees. Instead we are stuck with a one-time royalty payment from a competitor. The only redeeming feature of this scenario is that Lexar probably has the second best IP of any of the card assemblers. That is to say, I doubt that the Delkin's, PNY's and Viking's of the world have either core flash or core controller technology they can wield against SanDisk. SanDisk should vigorously go after anyone without a license to assemble CompactFlash. To ease up at this stage is insulting after the protracted and expensive legal battle we have been forced to witness as passive spectators. Aus