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

To: Jill who wrote (26888)	10/26/2004 1:53:10 PM
From: Art Bechhoefer	Read Replies (3) \| Respond to of 60323

Re: SSTI--I considered SSTI many times but preferred the more diverse product line at SNDK, plus the very conservative bookkeeping at SNDK. If there is a bias in my evaluation, it is similar to that held by Warren Buffett. If a company is well managed and shows it can make a profit during tough times, it's worth hanging on to. As Buffett has noted very often, you buy a good stock with the idea of holding it forever (or until the basic fundamentals change). Art

To: Jill who wrote (26888)	10/26/2004 8:04:12 PM
From: Dave	Respond to of 60323

That problems/challenges that face SanDisk are not "SanDisk specific", but industry specific. SanDisk produces a "commodity product" and as Art correctly acknowledges, when one produces a "commodity product", it is imperative to be the low cost provider. The main problem that I see is that SNDK claimed that flash would not see "dramification" or the like. However, what everyone is seeing is the initial stages of "dramification". DRAM providers would continually reinvest their cash flows into R&D projects or CapEx. Since the production process is more of a "trade secret", the real question is how quickly others can advance through the learning curve. SNDK does enjoy a strong balance sheet with plenty of cash available thanks to a well timed secondary offering. However, this cash will be reinvested in the business. Since other competitors will, also, be investing in their capacity and process upgrades, over the long term, these investments may be rendered moot. SNDK also engaged in a "first strike" by lowering prices. Instead of managing the business for increasing EPS, it would be better for SNDK to manage to business on a Return on Capital basis. The key drivers to build future shareholder value are top line (i.e. Revenue growth) (Duh!) and margins. One last thing to consider is that their JV, FlashVision, operated at a loss last quarter. While the loss is small, since this investment is accounted for under the Equity Method of Accounting, it is difficult (to say the least) to determine the causes of this loss.