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

To: Craig Freeman who wrote (21033)	10/24/2001 10:53:24 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Craig-- Different investors have different objectives, levels of risk, and ability to cushion losses (through tax deductions, etc.). There is no single investment that is ideal for everyone. Comparing SNDK and GE makes little sense because each stock has certain attributes that will appeal, or not appeal to a particular investor. Many institutional investors would be unable to hold SNDK shares because there isn't enough liquidity in the relatively small number of shares available on the market to allow large transactions (e.g., 1 million shares at a time). Many individual investors might benefit from a small cap stock because, statistically speaking, the small caps generally outperform large caps over the long haul. The products and services offered by GE have a growth potential far below that for the products made by SanDisk. However, the diversity of products made by GE insulates the company from wild swings in stock price. SanDisk, like many other specialty companies, is a niche player. Its fortunes can vary, depending on product demand, and since its products currently address consumer markets, that demand can fluctuate even more than would be the case if they were producing a health information card, as an example. An investor could expect GE revenue growth running somewhere between 8 and 20 percent annually, based on the types of products GE makes. For SanDisk, which is one of the dominant companies in a "disruptive technology," the potential revenue growth is harder to predict, given the current overcapacity faced by the flash memory producers. However, if one looks at units sold, it appears that growth is increasing at about 40 to 70 percent a year. Those who choose to invest in this fast growing market obviously believe that earnings might grow much faster than earnings at GE. However, the actual results will vary because of all the economic, technology, and production characteristics in the flash memory industry. I suppose one could try to assess the differences in risk and the wide range of earnings growth rates for each company, attach a probability of achieving those gains, and then come up with a number that would favor one company or the other. However, the estimates would be subject to so much error as to be almost useless in choosing between GE and SNDK. It all comes down to (1) growth potential for the respective markets for each company and (2) the quality of management. GE has a record of pretty good management quality, but so does SanDisk, especially when you look at key operating data, such as cash flow and debt service costs. Which company is better to invest in is a matter of choosing which one better fits INDIVIDUAL INVESTMENT GOALS. If an investor can stand the higher risk of SNDK and is looking for substantial earnings growth stocks, then SNDK may be preferable to GE at current prices for each stock. If an investor wants low risk, a fairly predictable dividend, and lower growth, then GE obviously would be a better choice. Art