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

To: Smiley2 who wrote (35322)	2/16/2007 7:55:05 PM
From: MLNM00	Read Replies (2) \| Respond to of 60323

Nothing really new since q1 cc . All were planned for a while and probably they knew what they are going to do already in the cc only 2 weeks ago. All the talks now about gross margins and ASP's decline are within everybody expectations. ELi needed to show that the layoffs was forced on him and he is hurting too (20% salary cut) BECAUSE HE PROMISED DOV THAT THERE WILL BE NO LAYOFFS BUT WITH THE USB PRIVATE LABEL ELIMINATION HE CANT KEEP HIS PROMISE . SO HE SAYS "IT'S NOT ME IT's THE MARKET"

To: Smiley2 who wrote (35322)	2/16/2007 8:56:27 PM
From: Pam	Respond to of 60323

Just 16 days ago on the earnings CC, Sandisk was emphasizing the self-corrective nature of supply/demand balance and seeing evidence of competition moving some production to dram. Today, they are talking about significant margin pressure for the next three quarters. Yes, what a difference last 16 days have made, huh? They didn't talk about this kind of margin pressure but we all knew that this is going to happen soon. Here are some recent posts expressing margin concerns- Message 23239279 siliconinvestor.com What changed in between? The only public news that I`m aware of is Micron reiterating their determination to ramp up their joint nand project with Intel. Nothing really new. Sandisk should already have a decent handle on manufacturing cost reductions and margin effects of increasing noncaptive supply for the rest of the year. Did they suddenly realize that the competition won`t be backing off anytime soon, if ever? Well, situation is not all doom and gloom as this company is still making some money while others are losing money in this business. But I don't like the statement about lack of visibility going forward. Just 2 weeks ago they said, they will have 10% in non-captive purchases in 1Q so either they are forced to purchase these parts because of a revolving forecast they provided to Samsung 2Q's ago or they are preparing more inventory of high-performance cards for their second best Q i.e. 2Q07! Also, such an announcement sends a signal to second-tier vendors to be cautious and not aggressively build inventory of cards because Sandisk could start dumping cards in retail at ridiculously low prices and they could get killed in that price war. This also gives Sandisk some extra time to work down their piling inventories and get rid of low density cards in the channels! As it is, second-tier vendors are scared to build 1GB cards, but I have a feeling that Samsung may step-in with their own brand of cards to retain marketshare and the primary beneficiaries of this could be companies that provide controllers- Silicon Motion, Phison, SkyMedi, etc. Some more things on positive side- Hynix probably have lost significant business from FLSH (as they do not supply any more oem USBs) and Shuffle demand, athough seasonally slow, could be going to IMFT against those loans Apple provided to Intel/Microm some time ago. They are wisely cutting back on nand production, STM may do the same. Samsung has also done some switching from nand to dram because they had 14 days of inventory at the end of 4Q vs. 2-3 days in the past and seasonally weak demand for Nano's. IMFT is also pushing-out expansion a bit, but still ramping-up overall. So at the end of the day, if elasticity kicks in, things may stabilize in a quarter or two. What the margins would look like going forward is still too early to predict. We probably wouldn't know until 2Q results are out from Sandisk. I would also keep an eye on rising inventory, there could be some markdowns! My sense is this oversupply situation will accelerate higher amounts of nand being embedded into cell phones and over the longer-term this could hurt the card business somewhat. Also, if they can get MLC based SSD's out soon, that could help soak-up some supplies. Or, did Eli experience an epiphany on vacation and decide to push the likes of Hynix and STM out of nand? If Toshiba is to make good on their stated goal of 40% market share in the next 2-3 years, that share has to come from somewhere. Samsung won`t be ceding much share and I don`t see IMFT backing down. Some employee reductions had to happen but the salary cuts/freeze smell of digging trenches. LOL! He is fresh from vacation and must have strategized as to what his next step would be to push Sandisk ahead ;-) Toshiba/Sandisk will have their 40% market share in the next couple of years and some of it will come from Samsung and some from Hynix/STM and some from Renesas which is gradually exiting nand business. IMFT having started from a smaller base, will probably add marketshare in the coming years. Some job cuts were warranted after losing/eliminating the low-margin USB OEM business but salary cuts for regular employees? I agree, it seems like preparation for a long fight! I would have liked to see some cutback in stock option grants to current Senior management team though! While this stock has been all over the place last couple of years, management have come out way ahead by getting SOs at low prices and disposing off stock from SO exercising at regular intervals, while investors haven't made much in the last 4 years unless they also sold some into the rallies. So what to expect on Tuesday? Could we re-test 52 week on high volume or do we overshoot it? Only time will tell! Have a great long weekend everyone!!