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

To: limtex who wrote (26209)	6/25/2004 8:50:37 PM
From: Pam	Read Replies (1) \| Respond to of 60323

Limitex, <Well I am not sure that anyone on this thread predicted that the stock would drop from around $80 to around $40 with two of the best qtrs it has ever achieved, in fact two qtrs that were pretty outstanding by any standards. > Well, that's why I said we all have been out-manuevered. <We seem to have forgotten the scale of the growth we have just seen. The anlaysts and the shorts never predicted what d-cameras would do to the flash memory market. We did on this thread and have been doing so for some time.> Which maybe be true, but they seem to have made the money and have already put it in the bank and those of us who bought the stock about a year ago are either losing money or close to the same place! <The reaction to the outstanding earnings was a bolt from the blue and I do not beleive that it was cleaver shorts. My guess is that it is soemthing to do with institutional holders doing fancy things with stocks that they own and computer programs that feel the temperature of the stock and taking real time readings of various parameters of teh sock while it is trading during the day sell it short and carry on doing so as long as it works and it has been working.> For a stock to rise in price, the future outlook of earnings is a lot more important than the present record earnings. <What would stop that would be buyers but when the stock went on its run late last year and early this year it was in the period just before SNDK joined an index and that always does odd things to a stocks price. Now that the stock is in the index off comes the pressure to buy and you then have a whole bunch more holders who have bought becuase they have to own the index and these guys als o do this protfolio enhancement stuff and there you go. Well why don't all stocks in indexes have the same haircut? I don't know.> I don't know when they were added to SP500 but I take your word for it. I believe, it is more of a coincidence that the stock started its downward decline after being added to SP500 and your last statement is the proof of it. <As for margins when suddenly did all these analysts who don't have a feel for any of the guts of the technology suddenly get a feel for that the margins in this business are disspearing? This too I have no idea but they apparenlty have nothing better to discuss than how badly SNDKs margins are going to be?> I have never had too much faith in these analysts anyway and quite frankly I don't even seem to understand their ratings. I have seen analysts with stock at 20 and Target Price at 40 and yet it is an Market Perform! I didn't know the street is expecting a 100% return on the Market in the next 12-18 months! <Actually I seem to recall Eli preaching for years that lower ASPs were the way to build this business and now he is doing precisely that.> I agree with you here, although some of the analysts do not like this model but I think it will work for the next several years which is my investment horizon. <Has anyone on the thread given a view of margins going forward? I think that is wehre we might usefully start some exploration and BTW does anyone know the date of the announcement?> I haven't seen anything but it will depend greatly on the demand. We know the supply is increasing at a dramatic pace and if the demand isn't, there will be a lot of pressure on the gross margins. Companies like Samsung are big enough to dump their NAND output at no profit or even a loss, if they have too, without making a big dent to their B/S as they can easily absorb this loss if they have to get rid of their produce. Although, I do believe that SNDK can maintain 30% product gross margins and even improve a bit in the last Q of the year provided the demand of 150% bit growth rate materializes. As I said, we need explosive growth to balance the significant improvement in the supply and advances in technology. Keep in mind, even if the bit growth is 150%, with a 40% decline in ASPs the revs for the industry grow by 50% from last year and if there is a price-war (if demand is slipping relatively speaking, this will happen) and the price decline is 50%, the industry rev's will grow only 25% from last year and if the bit growth is only 125% or the price declines 60%? God help us! But by the same token if the bit growth is 180% (this was Samsung's original forecast but since then they have brought those expectations down a bit closer to 150%) Sandisk could do a lot better than all the players out there because they will be lowest cost producer in 2nd half of this year. Key: How much demand is there for flash?? How much flash is selling out there? Someone had posted some demand forecast for flash drives for next year. If we can realize that (I took the middle ground of that forecast- 100mm units next year @ $50 a pop retail value) we can have a huge revenue stream from Flash drives alone and Sandisk will be a clear leader with the 512MB (4Gbit) Monolithic Nand chip! They will be the King of flash drives selling 4GByte Jump Drives! (Oh God! My first machine had a hard disk of 30MB and 640KB of RAM!!!) till Samsung moves to 70nm technology or starts developing MLC chips. -Pam