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

To: Road Walker who wrote (24113)	12/6/2003 9:21:25 PM
From: limtex	Read Replies (1) \| Respond to of 60323

JF - Speeding train???? Do you happen to have inside information that flash sales are collapsing while the conventional wisdom is the very opposite? L

To: Road Walker who wrote (24113)	12/7/2003 11:50:24 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

John, the fact that SNDK is up 400% in 10 months doesn't mean it's too high. It may mean that 10 months ago (as I believe) it was far too low. Given the dominant position in the industry, the strong balance sheet, the surprisingly high growth in demand, I frankly have found no justification for the stock dropping below about $50 during the past year. The reason it did was due partly to the negative feelings about the entire semiconductor group and partly to factors somewhat outside the control of SNDK, including the value of its UMC and TSEM shares. Your comments about overcapacity echo those of many analysts who believe that SanDisk will be faced with too much capacity too soon, and this may drag down profit margins by forcing down product prices. The dilemma as I see it is that some analysts assume that the new plant will be fully operational in a year or so, and that competitors like Samsung will be bringing new capacity into the market even before that. Now it's true that in businesses requiring long lead times and big capital investments, there will be periods of overcapacity. It's inevitable. It's true just as much in semiconductors as in operating a vineyard. In periods of overcapacity, the winners are either those that are the low cost producers or those in particular parts of the market where profit margins may be higher. SanDisk has done an excellent job getting its products into the retail markets where margins can be much higher. They also have enough patent protection to give them a slight edge either in cost or performance. And finally, they have a management team with a good track record. The question is whether the decision to expand now, at a cost of more than $1.8 billion (shared with Toshiba) is reasonable. Many analysts think it isn't. I think it is. Art