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

To: Dave who wrote (26315)	7/7/2004 8:03:57 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

>>The primary driver causing book value to increase was the secondary. << Dave, the total book value increased, but not necessarily the book value per share. The secondary offering would have diluted the book value per share, were it not for the price of the offering, currently above market price. Book value per share, nevertheless, continues to increase because of increasing retained earnings. The key issue that is currently having an impact on larger investors is their assumption that there is too much new capacity, forcing companies to reduce prices. This is not necessarily true. Would Micron Technology, a latecomer into the NAND flash memory sector, commit millions of dollars to a NAND production line if there was pending overcapacity? I doubt it, and I also doubt that MU thinks it is any more efficient in producing flash memory than any other more experienced players, including Samsung and SanDisk/Toshiba. Instead, the growth in new capacity is most probably in reaction to a well documented, rapid and steady growth in demand for flash memory in several new applications and as a replacement for low capacity hard disk drives (i.e., less than 10 gb capacity). As to the secondary offering, it was made when SNDK shares (post split) were trading almost 50 percent higher than at present. The price of the offering was good for SanDisk and will eventually be reflected in a very substantial return on equity. Once it has become obvious that SanDisk has not only a strong balance sheet but a great return on equity, the institutional investment managers will "discover" the stock. Smaller investors, less influenced by the establishment, can take advantage of the reality gap. Art

To: Dave who wrote (26315)	7/7/2004 11:07:23 PM
From: Sam	Respond to of 60323

The primary driver causing book value to increase was the secondary. I have no idea why this was not a good thing. When the secondary happened, everyone knew exactly what it was for--some months earlier, Sandisk and Toshiba had talked about jointly building a plant, splitting the cost. There was some gulping on this board and, I suspect, elsewhere as well, when it was realized how much Sandisk's share would be. At the time, the balance sheet was healthy, but there was "only" something like half a billion dollars in the bank, and the JV was projected to cost well over a billion just for Sandisk's share. Anyone who bought the secondary knew that this was what it was for. Fine, you say the secondary was the driver behind the increase of BV. But the driver behind the secondary was the JV. Plenty of investors saw it as an opportunity. That was why the secondary was a success. Like Duh. I expect as additional competition enters, this JV will become less profitable. Well, we'll see. Perhaps you are right. There can be no doubt that Mr. Market is agreeing with you right now.