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

To: orkrious who wrote (21032)	10/24/2001 10:37:28 PM
From: Ausdauer	Respond to of 60323

Jay, the landscape has changed dramatically in the last 10 to 12 months. I agree that making a buck will be harder now. This is not true only for SNDK, but for everyone, really. SNDK is particularly hard hit due to the astoundig fall in ASP's and the lack of industrial buyers for the higher margin products. Taking a stroll at my local Target I noticed something quite different. The CompactFlash cards are no longer locked up behing the electronics counter, rather they are displayed openly on racks along side the Kodak 35mm film. Target is selling SanDisk, Lexar Media and Fuji (yes, Fuji) branded cards. If you look on line you will see 64MB CompactFlash selling at $39.99 a piece with 128 MB CompactFlash selling for about $74.99 at reliable e-tailers... amazon.com amazon.com Flash cards are commoditized and SanDisk's inability to enforce the '987 patents means that consumer acceptance of CompactFlash has not rewarded SNDK. It is hard not to be disappointed about that. I am sure that nobody is more disappointed than Eli and his crew who invented the standard. Recall, however, that Eli has stated many times that the acceptance of flash as a generic, everyday, commonplace storage medium is also a longer term goal which will benefit this market segment even if SanDisk doesn't benefit directly from every sale. Over the next year or two I think Eli's theory of market elasticity will either be proven or refuted by the OEM's actions. The steep decline in retail pricing will probably begin to plateau, while manufacturing costs for flash will fall by 40% with tighter design rules, and by another 40% with the transition NAND MLC at Dominion. I could imagine a scenario where multiple new applications for flash memory evolve. The Micron lawsuit is interesting in this regard. At some point, once consumer confidence firms up, demand for SNDK's products will rebound. Can you recall one year ago when quarterly sales looked as if they would exceed $200 million by 2001? SNDK's growth rate was amazing, despite the fact they were capacity constrained for part of 2000. And although we will be negatively impacted by the drag of fab start-up costs, at some point the advantaging of controlling production will be realized. It would be naive to think that the high end flash market could never end up like the DRAM market, but the applications for flash are nascent and I believe many potential uses are still undiscovered. Also, I don't think that all semi manufacturers will have the same ability to produce flash, to produce flash at a competitive price, or to vertically integrate flash supply with end-user sales. I remain optimistic about SNDK's prospects for this reason. It is hard not to beat oneself up for missing the timing and magnitude of the tech recession. When I see tech inventory write-offs approaching $1 billion dollars I also realize that there were many who failed to recognize the impending collapse. As a result I have tried to focus on the longer term and to reassess my investment goals. To dwell on past mistakes is terribly destructive, at least as I have experienced it. Aus