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

To: Art Bechhoefer who wrote (19408)	3/2/2001 6:03:31 PM
From: 5dave22	Read Replies (3) \| Respond to of 60323

Art, investing in SNDK right now is investing purely on faith and instinct. AMD, TXN, INTC produce necessary components of society. SNDK produces alternatives to hobbies (music, photography). I don't think the two correlate whatsoever. I bought a little bit of SNDK yesterday. I will buy more only after the economy turns positive, for an extended period of time. We've had this discussion before, that I delayed my digital camera purchase (and MP3 player) due to the economy. Currently, I think sales of CF will AT BEST stay even, it will probably decline slightly. There isn't as much money in peoples savings accounts as there used to be. I gotta run, have a nice weekend! Dave

To: Art Bechhoefer who wrote (19408)	3/2/2001 9:13:36 PM
From: Cooters	Read Replies (5) \| Respond to of 60323

Art, I received a call from Frank Calderoni, SNDK CFO, this afternoon. This was the result of over a month of back and forth E-Mails and voice messages in both directions. Since it was the second time he had returned my call and I was not home, my wife directed him to my cell phone. I mention this part because I had all my notes printed off at home and they were unavailable. I did the best I could. My primary focus was twofold. To reconcile the bullish outlook from Eli's ON24 interview with the warnings included in the earnings release, and to try to understand the royalty, patent, and licensing situation. His view was that Eli's comments about demand outstripping supply were long term in nature and still hold true. They have not changed their view that worldwide flash demand will exceed supply for the foreseeable future. I take this to mean Eli may well have known about the sharp drop in demand at the time of the interview, but did not feel it altered the larger equation of long term projected demand versus maximum supply, based on current and anticipated fab capacity. Folks, he said the two statements were consistent and I saw no reason to pursue it further. We were in agreement demand fell off a cliff. I was more interested in the royalty issue than specifics about where the demand shortfall was seen, so I did not pursue it. I told Frank I would word questions about royalties to avoid any forward looking statements. I wanted to know what percentage of CF card sales not manufactured by SNDK generated royalties. He said that was difficult to determine because they do not receive(or maybe it was record) royalties based on card design. I believe this means royalties are at a technology(component) level, and not the finished product. A later statement indicating their license agreements are not categorized in a CF vs. MMC fashion(by standard), but by technology, seemed to support my line of thinking. We then talked at length about what I really wanted to know, which is who pays royalties and on what. The Memory Stick answer was straightforward. They do not receive royalties from Sony, but do indirectly receive royalties from some of the components used by Sony. I asked specific questions about TDK and Hitachi, and quickly learned they are not going to provide royalty information, only licensee information. Since I am much more familiar with QCOM's situation than SNDK's, I had to use analogies to get where I wanted to go, and he was more receptive to concepts than to specifics, which he was not going to answer anyway. He was very clear they do focus on their patent portfolio, the enforcement of those patents, and the expansion of that patent portfolio. He also indicated their decision not to disclose royalty rates or even who pays royalties at all is for competitive reasons. Here is my view of the situation: SNDK should be considered a manufacturer of flash memory and not an IPR house, at the present time. They are primarily concerned with driving specific standards and expanding the market, both demand and supply. Those standards use SNDK patents. They are at present willing to enter into license agreements, which they require to use their patents, that reduce or forego royalties. The return benefit is to drive the business forward in SNDK's long term interests(open for argument, but their view). Possible return benefits I can think of are cross licensing, fab capacity, support for specific standards, etc. To put a future view on the above, it sounds clear they require a license agreement if you use their patents, and they will pursue anyone who is not licensed. However, their patents are currently available for horse-trading for certain things they need. If you don't have any, you pay the royalties. I suspect they intend to keep the club very small, and when the market has reached a certain maturity, close down the club. A barrier to entry, if you will. This really is not my area, but I'll try to expand on anything the thread feels is not clear. Cooters