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

To: clix who wrote (28066)	4/27/2005 9:07:01 AM
From: slacker711	Read Replies (2) \| Respond to of 60323

This seemed to imply that the amounts mentioned as going into Fab 3 would somehow be additional to the current cost structure. Can one predict tighter margins as a result? Or is this guy making unwarranted assumptions? In addition to the capex, there is quite a bit of R&D that is going on with the 300mm transition. This R&D will move into COGS once the new fab begins producing commericial wafers (no matter how small the quantity). It will definitely have some impact to both the gross margins and the net margins....but Sandisk managed to absorb $10 million last quarter and still deliver record margins. The third quarter will be the worst since it will have the most expenses and the fewest amount of bits coming out of the new plant. FWIW, these wafer size transitions happen about once a decade. The beginning of the 450mm transition isnt supposed to happen until after 2012. Slacker

To: clix who wrote (28066)	4/27/2005 10:17:43 AM
From: Bargain Hunter	Respond to of 60323

Start-up costs will ramp faster than production. But I don't know whether those extra costs will go into COGS or overhead. [Any accountants out there who could help?] At some level it doesn't really matter, but those who pay attention to items like gross margin need to make sure they understand when the numbers are distorted by such events. Such distortions can lead to mispricing of the stock and trading opportunities.