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

To: John Trader who wrote (19966)	4/5/2001 9:49:43 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

John, in October, 1998, SNDK shares were selling at a real value of about $2. The rest of the stock price was cash, meaning that one could buy the whole company at $2 per share (patents and all). The price reached that depressed level because SNDK had old, outmoded inventory, which it had to sell at a loss, writing off considerable amounts that resulted in a net loss. While some people may think that October, 1998 was similar to the current situation, there are many basic differences. Perhaps the major difference is that the excess inventory is not outmoded, but simply taking a longer time to be absorbed by mainly OEM buyers. A second difference is that SNDK today has a much larger percentage of revenue from retail sales, where profit margins are higher than from OEM. In 1998, SanDisk appeared to some people to be a company stuck with old model merchandise that couldn't be unloaded at any price. In 1998, when SNDK and its fabs were still learning how to produce flash memories, and getting better yields with each batch, older inventory lost value quickly. Now the situation is more stable, and demand is more widespread in terms of both geography and product types. If SanDisk resembled many other tech stocks limping along with momentarily reduced demand while burdened by excessive debt, THEN the stock would be risky. But the market is just beginning to differentiate between companies with unsound financials and those like SanDisk, whose positive cash flow and low debt make them for more solid investments with much less risk. When you read articles such as the recent one in BARRON'S, it's a signal that fund managers are finally coming back into this market. When the stock approaches 70, as I believe it will later this year, we'll all wonder why we hesitated at 18! Art