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

To: Pam who wrote (26967)	11/17/2004 1:10:48 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Pam, it's difficult to find a segmentation of Samsung profits and to know whether its flash memory business is doing anything other than generating revenue at the expense of profits. The Samsung policy is well understood by now: Lower prices, no matter what, in the hope that competitors will be discouraged and finally will give up. It's also difficult to know exactly what portion of SNDK revenues came from wafers purchased from Samsung, and whether in the current and future quarters there will be less purchasing of Samsung product by SanDisk. In theory, SNDK margins should go up if they are able to meet their product needs from their own manufacturing. In theory, SNDK profit margins should deteriorate less if they are buying less from Samsung. I now find it impossible to predict earnings per share because of all these changes, including the calling of the convertible issue. The only certainty is that SanDisk has a fairly strong balance sheet, including positive cash flow. It's not too bad a situation for the current economic climate. Art

To: Pam who wrote (26967)	11/17/2004 1:41:56 PM
From: broozer	Respond to of 60323

Pam They are definitely beyond the point of return with respect to Fab3 (Flash Partners). They are committed to $1.25B in expenditures through 05 and 06 and also are required to purchase 50% of the output from the JV. With respect to the captive/non-captive breakdown, I have never seen the ratio larger than the 80/20 achieved in Q2. In Q3 it was 65/35 and they are projecting the same in Q4. Either they don't have the capacity to source 100% captively or they don't manufacture every type of form factor and need to get some from Samsung. I actually think the SNDK vertically integrated model could be a liability in a period of serious oversupply, especially if they can't produce as efficiently as Samsung. If you remove the lic/roy revenue, the GM drops to 29% for Q3 and the OM drops to 11%. Should be interesting. Best, Broozer