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

To: Rex Dwyer who wrote (2447)	1/22/1998 9:23:00 AM
From: JJB	Read Replies (1) \| Respond to of 60323

Earnings may cause some to reconsider short position. IMO substantial given the relatively small float. viwes.com These are just the reported ones. jjb

To: Rex Dwyer who wrote (2447)	1/22/1998 10:04:00 AM
From: Jerome Wittamer	Read Replies (1) \| Respond to of 60323

Analysis of Financial Results Sequential Basis As anticipated, products revenues grew at a slower pace from the 3Q to the 4Q : +10% instead of +26% from 2Q to 3Q At the same time, royalties increased +18% compared to +73% from the 2Q to the 3Q. These royalties were booked as liabilities (deferred revenues) during the 3Q and were partially recognised during the 4Q. As a result deferred revenues decreased as at 31.12.97. This means many things which I'll discuss below. Revenues thus showed a 12% sequential increase in comparison with a +32% increase for the prior period. In the meantime, cost of sales slowed less than revenues increased. Which entails that on a sequential basis gross profits growth lost momentum to achieve a mere +9% increase. (Gross profits grew +46% in the 3rdQ. While R&D spending kept the annual pace of +11%, sales & marketing expenses skyrocketed +20% sequentially or +29% semi-annually from $2,971,000 in the 2Q to $3,840,000 in the 4Q. Indeed more money was spent for building sales channels (Ingram Micro, CompUSA,...) and increase visibility of the brand. This includes the well-publicized launch of MMC. While this item should be kept in sight, such an increase could bode well for the company by fostering and bolstering up new sales. In fact, on an annual basis, such operating expenses make up only 10% of total revenues though they grew by +43%, i.e. more than gross profits. This short-term "bad" impact is offset by G&A expenses which were cut by 4% (Thanks Cindy! Good job!). Operating income remained constant (+4%). Net income grew +6%. Net income per share grew +11% or +6% on a fully diluted basis. In addition, product gross margin decreased to 31.6% from 33.4% in the 3Q due primarily to competitive pricing in the market place. Therefore, as Dr Harari anticipated (poor naysayers) profit margins decreased from a 'nice' 44.29% to a 'not so worse' 43.44%. Hopefully this company is getting more royalties-oriented! Important quotes (I somehow modified): "ASPs declined 51% in 1997 due to a shift to lower capacity card" "In the 4Q, shift to higher capacity cards (new hi-resolution digicams)" "This past holiday season was our best ever" "Yields on the 0.35 micron technology are excellent - which brings down costs" "revenue should decline modestly in the 1Q" : that's clearly a statement in response to our comments on the thread Backlog is quite high at $18.6M for a beginning of the year...good sign. The last message is optimistic and contains some clues : strong design-in activity across all products (CF) and notably in the MMC area!!! Still, beware of Asia... This should make a good year, once again for SanDisk