Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (52808)	7/18/2011 12:24:06 AM
From: Sam	3 Recommendations Read Replies (1) \| Respond to of 95761

Not a monopoly or duopoly. Actually, it is a duopoly--Samsung and Toshiba/Sandisk each have market shares in the mid-30s. IMHO, they will both improve those shares over the next year or two. It is simple mathematics--they are building more new capacity than their competitors (Micron/Intel and Hynix). Commodity industry. I replied to this in a previous post. Gross margins adequate, but nothing special. Yes, Intel's margins are obviously better, but they probably have nowhere to go but down. Sandisk's margins will likely go up after next year, in part due to the fact that the JV that they have with Toshiba will begin to throw off more and more cash and in part because of AFM, which I very briefly explained in my previous post on Sandisk. I am not going to try to explain either of these tonight; they have both been explained on the Sandisk thread on SI or investorsvillage. From 2001 to 2006, their total shares increased a lot. Since then, their LT debt has increased a lot. So, for the last 10 years, they've required either more debt or more equity to finance their business. Carries significant debt (LT debt = 1.7B$). Many of the names on the list have near-zero LT debt. True enough. That will most likely come to an end now. They have two convertibles outstanding, for 1% and 1.5%. One is convertible at $83, in 2013. The other is convertible at 53, but they have hedged it so that the real price is 73. Most of the increase in shares came from 3 acquisitions, the most recent one just a couple of months ago. The long and the short on that acquisition is--if they can make TLC chips work with enterprise SSD drives--or even with consumer SSD drives--then it will be a roaring success, and their margins could go over 50% again. Compared to INTC, they have slightly lower valuation (PE 8 vs. 10, P/S 2.0 vs. 2.7). But INTC is a far safer investment (higher gross margins, steadily falling share count, much stronger moat, better balance sheet). On balance, I'd rather pay the slightly higher valuation for INTC, and get a lot more safety. And INTC is in NAND. Well, Intel has something like a 6% market share in NAND. It might increase slightly over the next few months (and might not), but over a longer period of time, it won't increase unless they make an acquisition (in fact, some people have speculated that Intel may eventually take over Sandisk, although others have said that this is nonsense). They aren't participating in Micron's new fab in Singapore, and even with the Singapore fab, the total output of the Micron/Intel partnership is barely keeping up with the growth in the sector, if that. Their latest fab is for 100K wpm; both Samsung and Sandisk/Toshiba are building fabs that will have eventual capacities over 200k or more wfm (granted, those fabs will be brought up slowly in phases, but so will Micron's). No doubt that Intel is a "safer" investment, it won't have the swings that Sandisk will undoubtedly have. But whether it is a better investment from this level (Sandisk around 41, Intel around 22), I don't know. We'll see.