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

To: Sam Citron who wrote (27037)	11/28/2004 10:02:20 AM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

Sam, I regard almost every investment I make as a long term opportunity, since I don't have the time or inclination to use TA and/or engage in any short term trading. I look for companies with a good management record, below average debt, conservative bookkeeping, and an expanding market for their product lines. I prefer at least some proprietary technology in order to avoid the dog eat dog characteristics of purely commodity products. As to cyclical nature of company performance, it's true that a company like SanDisk is going to be somewhat cyclical because it produces a consumer item, demand for which varies with disposable income and pure whim. The cyclical nature of consumer durable goods is somewhat lessened by the worldwide market for those goods, since not every country economy goes up or down in synch. I would like to see SanDisk make something less subject to consumer demand, but so far their efforts (e.g., health information cards) have not been successful. Samsung has a long history of entering new markets by pricing very likely below their total costs, which is possible for extended periods through their relationships with Korean banking and government interests. Their overall objective is to dominate a particular market, at which point they have the ability to set product prices high enough to make a profit but low enough to drive out smaller competitors. This hasn't worked with SanDisk because SanDisk has proprietary technology that Samsung needs, and SanDisk, in combination with Toshiba, has a lot of financial muscle. Eventually flash memory will become a commodity with virtually no difference between competing products, similar to the hard disk drive business. At that point, I might not have much enthusiasm for the investment because earnings will be dependent entirely on the size of the market rather than on proprietary product improvements. Finally, one ought to evaluate a stock like SanDisk by comparing its fundamentals with other high tech consumer stocks, knowing that the fortunes of the whole group (even when their products are considerably different) are seen as similar by many investors. There is a growing belief, at least among institutional investors, that technology stocks are not going to grow as fast in the coming years as they did during the last couple of years. If that is true (and I'm not convinced it is), then I want a stock with a price-earnings ratio below its peers, adjusted for varying growth rates. So far SanDisk fits those criteria pretty well. Art