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

To: Pam who wrote (25357)	3/15/2004 4:12:37 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Pam, if I saw the same 10K you referred to (filed 3/12/04), I believe the fab 2 referred to in the document is the one involving Tower Semiconductor in Israel. I don't see anything unusual in the agreement. But other parts of the 10K do give me some concerns. This is the first time I've seen the details of the agreement with the Taiwan law firm, whose partner stole and sold stock belonging to SNDK. The terms for restitution are perhaps the best that could have been obtained, but still they're not good for SNDK. Besides taking an IOU of $18 million from the law firm as a total loss (Who would want to deal with this law firm again?), the worst part, it seems to me, is that SanDisk agreed to a restitution of loss, based on market value at the time, paid back over time, but without any interest on the unpaid portion. Furthermore, SanDisk is not entitled to any appreciation in the stolen shares (which went up considerably after the theft was reported). Not good, but maybe there was no way to get anything more. It is hard to predict future profits merely on the basis of growth in total memory capacity sales, modified by a drop in ASP. Somewhere in that equation, one must factor in a favorable exchange rate and its benefits to SNDK bottom line expressed in dollars. In particular, with most of SNDK chip production now centered in Japan, and with the appreciation of the yen, even a lower sales price in yen could still generate higher dollar sales adjusted for foreign exchange translation gains. The best predictor of SanDisk earnings remains the overall growth in demand for flash memory products. Somewhere along the line, it will be necessary to determine if worldwide fab capacity additions will have an adverse impact by squeezing profit margins. I don't think we're anywhere near that point, however, as demand is simply taking off, relieving all fabricators of a profit squeeze. Art