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

To: limtex who wrote (24173)	12/8/2003 9:49:08 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

L--One of the key issues here is the discounted revenue growth of 25 percent a year for the next 10 years. First, Ping Yu makes no distinction between the differences in profit margins between commodity producers and producers with at least some patent protection. Margins for the latter are higher, so one can't look just at revenue growth but must factor in EARNINGS growth. Second, no one in his or her right mind would attempt to estimate ten years into the future in a business like this. Who knows? In five years there might be an entirely new technology that renders flash memory obsolete. In making long term estimates of earnings, one has to be practical and limit the estimates to the known technology, not the unknown. At the same time, one should not rely on a single percentage assumption for growth but should calculate a range of possibilities and pick the most likely from that range. Had Ping Yu used a fuzzier model (more appropriate, since the data aren't that good), the results might show much HIGHER growth than predicted for the first couple of years, and LOWER growth subsequently. That would change the view on whether the shares are currently overvalued. Art