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

To: Pam who wrote (26508)	8/13/2004 2:12:15 PM
From: slacker711	Read Replies (1) \| Respond to of 60323

Looking at the pace of declines in the spot markets, it seems to me that either Samsung has been dumping the output (the ones that Sandisk is not buying from them, if one remembers Sandisk lowered the non-captive purchase last Q, and also some others who are buying less as they are having a hard time to compete with Sandisk) or the demand is slower relative to increase in supply because of migration to 90nm technology and thus higher output. Any comments? At least some of the price drop is probably due to Hynix. They dramatically ramped production during the 2nd quarter....from 20,000 wafers in March to 35,000 in June. hynix.com Has anyone made comparisons with some other co's as to whether they should have higher GM because of being vertically aligned? I mean, 4Q03 is as good as it gets for Flash memory markets. I just came across this report for Samsung yesterday. I dont know where the analyst got the precise breakdowns for profitability by segment, but he has the Flash/SRAM segment with a 67% gross margin. baby.boom.com.hk They expect margins to drop all the way down to 50% during this quarter. For comparison, I believe that Sandisk gave guidance (during the analyst day) that their captive MLC margins were around 45-55%. I assume that Samsung was getting higher margins during the past quarter because they didnt cut prices as much as Sandisk and they are farther along the 90nm startup curve. I think Sandisk should be able to cut into this cost lead during the next six months with their own 90nm ramp....especially since Samsung wont be moving to MLC until the end of '05 (per their last CC). Slacker

To: Pam who wrote (26508)	8/13/2004 8:45:44 PM
From: Pam	Respond to of 60323

Hi Folks, Did anyone notice that Sandisk dropped one of the slides from the Keynote presentn at Pacific Crest on Aug 11 from the previous one on Aug 2, Slide #21? This was basically showing the dollar amount of Nand+Nor Flash shipped would decrease in 2005 and 2006 from 2004 before increasing nicely in 2006. The total MB of Flash is expected to rise every year till 2008 though as per study done by Semico Research in April 2004. -Pam

To: Pam who wrote (26508)	8/14/2004 9:54:26 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

Pam, in order not to duplicate the previous responses to your thoughtful questions, I would add only that the likelihood that Samsung is a lower cost producer than FlashVision may be compensated for by the stronger retail presence of SanDisk. It's one thing to produce a flash memory card that's, say 20 percent cheaper than the competition. But if the card must be sold to wholesalers rather than retailers, that 20 percent advantage may evaporate. You also suggest that Samsung will be able to use MLC in a short time, thereby lowering its costs for high capacity units. This is probably true, but it is also true that Samsung has obtained a license for MLC from SanDisk, which means that Samsung may be paying royalties if they use MLC. The main uncertainty that is translated into the low price for SanDisk shares still seems to be the perceived weakness in demand throughout the semiconductor industry. Intel, Cisco, National Semi, and others have issued guidance lowering their expected profits in the remainder of this year and into next. The price of SNDK shares, in my view, correlates mainly with this larger part of the semiconductor industry, even though the products and market niches are not comparable. In other words, the perception of problems facing Intel, Texas Instruments, Advanced Micro, etc., are probably a better proxy for SanDisk share price than spot prices of flash memory. Though I would agree that spot prices intuitively should explain profit margins much better than microprocessor or DRAM sales! Broadly speaking, the whole market is reacting negatively to higher oil prices, lower than expected employment data, and very tepid increases in gross domestic product. These conditions, despite administration claims to the contrary, should persist over the next two months at least, undoubtedly affecting the election outcome. The latest action by the Federal Reserve, moreover, to increase interest rates should pretty much dampen the economy and any possibility of higher overall growth. These conditions will create margin problems for SanDisk by next year, but they will not place SanDisk at a disadvantage to Samsung, given that SanDisk still has to buy some flash units from outside manufacturers. Art