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

To: Sam Citron who wrote (28041)	4/26/2005 8:28:35 PM
From: Cary Salsberg	Read Replies (2) \| Respond to of 60323

OT Hi Sam, PB and PC are not as useful as you think. NVLS looks good by these metrics when compared to AMAT and previous cycle troughs. The problem is that during previous cycle troughs, when things were scary due to actual losses, investors expected a quick return to cycle peaks. Today, we don't have scary losses or that expectation of the next peak on the horizon. In keeping with Fisher's thesis in "Super Stocks", PS is only useful when small declines in sales produce large margin compression and, hence, large declines in earnings. Since we are looking ahead and the NVLS corporate model calls for 52-54% gross margins at "peak" revenues, I think PE is the best metric, but not current PE. A proper valuation requires an estimate of the long term growth rate of the semi industry, an estimate of the share of revenue allocated to equipment purchases, and an estimate of NVLS growth compared to the rest of the equipment industry. PE is then computed based on corporate growth rate and prevailing long term interest rates. In 1996, I told my sister-in-law about the Blood thread and the stocks I recommended. She invested $17,000 in 1996 and by 2000 her portfolio was up to $165,000. With hindsight, no opportunity is as compelling. Actually, there are three themes I consider when I try to decide how compelling an investment in my 8 is. One, is the acceleration due to Moore's Law. We are doubling from an ever higher base. Two, is the end of Moore's Law approaching in 15-20 years. Three, is the great strides made by the industry to mute the cycles that have plagued the industry. I think the opportunity is more compelling today than in 1996 because business prospects are better, but the market has less understanding of the industry because of the changed circumstances. NVLS CEO has marvelled at the prospects of Flash memory for a few conference calls, now. The use of Flash will continue at a rapid pace, Flash production, among others, will drive equipment purchases, and NVLS will get a growing share of those purchases. These are all likely to occur and they have a high reliability. That SNDK will continue to benefit from Flash growth with good profitability, is less likely with a lower reliability. Now, I am far more an expert when it comes to NVLS. So much so, that my evaluation of SNDK is suspect.