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

To: pass pass who wrote (23800)	10/10/2003 5:36:55 PM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

The difference between the situation facing Lexar and SanDisk is that SanDisk manufactures a large part of its products in a factory jointly owned and operated by Toshiba. Lexar depends entirely on outside sources. SanDisk, in order to meet the unexpected growth in demand, has been buying wafer from Samsung. In a stable pricing situation with demand continuing to grow, any company forced to depend solely on outside manufacturing facilities can be placed at a disadvantage if its supplier starts to raise prices. The only situation where Lexar would fare better than SanDisk is if demand is falling and SanDisk ends up with underutilized capacity. Art

To: pass pass who wrote (23800)	10/11/2003 2:34:44 PM
From: Ausdauer	Respond to of 60323

Pass, I can offer indirect proof. "SanDisk benefits from stable flash wafer pricing. LEXR does not". GIVEN retail pricing falls from quarter-to-quarter... GIVEN inventoried product costs do not directly follow this trend... GIVEN that market demand dictates wafer costs... LEXR is more disadvanted than SNDK The indirect proof is... First, LEXR has lower product margins to begin with suggesting that a manufacturing model that is not vertically integrated is less profitable. Second, firmer pricing on flash wafers means higher spot prices. For those dependent on other fabricators, like LEXR, the spot price can be bid up by demand. SanDisk, on the other hand, enjoys cost reductions in its fab directly. This cost is fixed and does not fluctuate on the basis of external flash demand. SNDK also consumes all of its own production. Third, even SNDK will tell you that purchased flash wafer carries with it lower margins than home grown flash. Aus