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

To: Andre Williamson who wrote (20736)	8/15/2001 12:10:19 PM
From: Bargain Hunter	Respond to of 60323

Andre, I have always been intrigued by the following wording in the SNDK press release following the LEXR settlement: "Subject to Lexar’s representations and warranties relating to Lexar’s newly designed CompactFlash™ and PC Cards, SanDisk has stipulated that these designs do not infringe SanDisk’s ‘987 Patent." I read that pretty much as "If what they told us was true, they are no longer infringing the patent." It leaves the suggestion that SNDK can check for itself at some point in the future and demand royalties (per the rest of the agreement) if the "representations and warranties" turn out to be incorrect. If I was the suspicious type, I might be inclined to think that LEXR doesn't have a workable workaround, is still selling infringing product, and is hoping to get through it's present business difficulties before having to pay up. But more likely they were advised by their lawyers to put that wording into the 10-Q because in today's legal climate they need to warn about everything bad they can think of that could conceivably happen.

To: Andre Williamson who wrote (20736)	8/15/2001 9:03:25 PM
From: Ausdauer	Respond to of 60323

Lexar states clearly they think they have money through the end of 2001 and that's all. I'm still wondering who (other than a large competitor) might buy Lexar or its technology. I don't know why anyone would lend them money. Andre, Having listened to all of Lexar's c.c.'s I have a few responses... 1) They are planning to sell excess infringing inventory in Japan where SanDisk's patents cannot be enforced. (I don't know how a favorable judgement for SNDK in the Mitsubishi suit will alter this.) 2) Yes, LEXR should be able to quantify their risk going forward. Perhaps they have sold controllers to several other companies (like Viking) realizing that this may expose them to ongoing risk since any "old" controllers would be subject to royalty payments. They will indemnify Viking, so they presumably would indemnify any other company they sold to in quantity. (BTW, can you imagine the Lexar CEO calling the Viking CEO to inquire about unsold infringing inventory levels?!?) 3) If LEXR does not reach profitability and were to default on its loan obligations it is unclear who would have first dibs on their IP and licensing revenues. Would stockholders or the holder of the promissory notes own the IP? Was it used as collateral? I don't think that is public knowledge. Clearly Sony has some interest in the MemoryStick controller technology and would not allow the IP to fall into competitors hands. Perhaps Samsung would purchase the IP in that instance. 4) I still wonder if Lexar's controller technology covers MLC technology. Since Lexar has no capabilities for flash wafer construction/manufacture it would seem likely they lack the needed expertise to manufacturer controllers for MLC-based flash. Aus