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

To: Jim Greif who wrote (26212)	6/26/2004 10:14:21 AM
From: Pam	Respond to of 60323

Hi Jim, I am not doubting the size of Flash memory market, the potential is huge over the years. What I am worried about is the next couple of quarters things could be slower relative to capacity increases and price declines. As I have mentioned, SNDK stealing marketshare from competition is not good enough, the overall bit growth rate has to be in the range of 150% or better (for the full year) because those expectations were buit-in and seems like there is a risk that they may not materialize and thats why the stock is where it is. Also, remember the capacity increases and the costs coming down put a lot of pressure on the eventual revenues that can be realized. Flash drives certainly have a huge potential and new applications will keep emerging. Ideally the demand needs to pick-up in the 2nd half for SNDK to capitalize on its 4Gbit chips and take the leadership posn costwise as well as productwise. The more time it takes for this market to take-off others will catch-up (like someone mentioned 70nm MLC chips from Samsung by year-end) and SDNK's strategic advantage gets muted. In any scenario, there are two more reasons for my optimisim about SNDK- if the demand is slipping (again relatively speaking), SNDK can reduce their non-captive sourcing (as they wont need to buy that many chips from outside) and have decent gross margins in the face of declining prices (prices will decline if the demand is slipping) and secondly the cost advantage for 2nd half will help them maintain the higher gross profit margins. -Pam