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

To: JH who wrote (20755)	8/17/2001 8:56:24 PM
From: Ausdauer	Read Replies (1) \| Respond to of 60323

JH, I think Lexar has a definite foothold in the professional market with their premium products. I also think SanDisk is aiming for the much larger consumer electronics market where performance is not as critical and certainly remains less perceptible to the user. Again, cost, brand recognition, availability and reliability are what matter. I agree with you that SanDisk's decision to become a fab owner was a risk, albeit a calculated risk that was taken around the time of a potentially devastating earthquake in Taiwan. The decision to gain control over wafer design, construction and fabrication (alongside Toshiba) was also made during a period of time when consumer and OEM demand could not be fulfilled. In many way the decision is painful given the nearterm effect on profitability (lower die yields, greater impact of startup costs on initial wafers, low end-user demand...), but IMHO SNDK has been cautious not to overexpand or overextend themselves. Personally, I would be more worried if all production were geographically centered in Taiwan and if Toshiba were a competitor rather than a co-developer and supporter of SNDK. Given the current market situation I would compare the demand for flash memory cards to the market for bootleg liquor during prohibition. You can produce as much as you wish and there probably isn't much sense in labelling the bottles (spending a lot of time on merchandising and advertising), but you must have a store front (or back alley) to move the product. In this regard SanDisk does have a significant retail presence (brick and mortar) and distribution channel for its products. Competitors are pushing down pricing due to the vast quantities of flash cards out there, but not everyone will be able to move their product and sooner or later competitors will be forced to liquidate their supplies and perhaps leave the marketplace. This is where I see the off-brand items like "Mr. Flash" and the like are poorly positioned to succeed over the long haul. Nobody can afford to sell their products at a loss indefinitely. (This is especially true when "the still" costs $800 million and up.) This is a trying period for everyone. Let's hope the market for consumer electronics items opens up again over the next few quarters. Aus