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To: Dave who wrote (27104)	12/7/2004 10:43:24 AM
From: Pam	Read Replies (1) \| Respond to of 60323

Hi Dave, I would agree with what you said about the inventory and we have to monitor it closely in the coming quarter because sales for 3Q04 were 408mm and 3Q03 were at 281mm where as inventory levels at 3Q03 were at 95mm and 3Q04 were at 181mm. So while the sales yoy grew by 45% inventory grew by 90.5% Two caveats though- 1. The above Sales numbers includes Lic/Roy numbers. One should remove that and compare the sales (I was lazy to do that). 2. This time last year, NAND supplies were tight and for some products prices were even increasing a bit vs. oversupply right now. -Pam

To: Dave who wrote (27104)	12/7/2004 2:06:18 PM
From: broozer	Read Replies (2) \| Respond to of 60323

Dave Yes, SNDK gets about 36% of rev in the 4q so some of the inventory build is due to seasonality, but I think the correct analysis is the one Pam makes in post#27107.... sales for 3Q04 were 408mm and 3Q03 were at 281mm where as inventory levels at 3Q03 were at 95mm and 3Q04 were at 181mm. So while the sales yoy grew by 45% inventory grew by 90.5%. This is a valid comparison b/c we are comparing the same period from the prior yr. Also, Pam astutely notes that the pricing environment was relatively benign last year at this time. Re: Pricing Yes, agree with you 100% about being the low-cost provider in a commodity business. However, I believe that Samsung is probably the low-cost provider. Toshiba/SNDK is probably not far behind, though. Re: Diltuion Respectully, I disagree with you here. Whether the dilution is caused by a secondary or ESOs, your pro-rata piece of the pie has been reduced. I do agree, however, as Art has mentioned, there are very valid reasons to issue additional stock or convertibles to fund the growth of the company. I don't have a problem with this. What does concern me is the wealth transfer from external shareholders (you and me) to SNDK employees via ESOs. At 12/31/03, the most recent available data, there was a 25% "option equity overhang". By "option equity overhang", I mean that ESOs o/s and available for future issuance comprised 25% of the total basic shares o/s. That means if SNDK earns $1 per share on basic shares that would be reduced to $0.80 on a fully diluted basis. You and I just lost 20% of our return to employees. That is what I mean by a strong headwind. Although I am long SNDK and would like to see them do well, I feel like I am able to look at SNDK objectively. My objective is to exit SNDK at around $25 and them look for another entry point next year around $17, which I think I will get given that SNDK hit $19 after 3Q earnings. Enjoying the discussion Best, Broozer