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

To: Jerome Wittamer who wrote (3063)	5/21/1998 3:28:00 PM
From: William Nelson	Read Replies (1) \| Respond to of 60323

Looks like we are turning back up on large volume. I guess my sale did the trick...it never fails....

To: Jerome Wittamer who wrote (3063)	5/21/1998 4:52:00 PM
From: Marc Phelan	Read Replies (2) \| Respond to of 60323

Jerome, Happy Memorial Day! Look closely at the Dec./Jan. chart for SanDisk. We could very well be testing that low. Note that the stock shot up over 5 points in three weeks following that low. I think we could have a very important technical test here. Marc PS: If it breaks that low I don't think it will be pretty. Perhaps now is the time for a straddle?

To: Jerome Wittamer who wrote (3063)	5/22/1998 1:13:00 AM
From: Rex Dwyer	Respond to of 60323

SanDisk is borderline profitable without the royalty and license fees. In 4Q97, the net income without license fees and royalties, and without interest income, was only $0.538M. In 1Q98, SanDisk would have lost $2.672M without royalties, license fees, and interest income. I sometimes wonder why they should manufacture at all. But this has been the case all year. In FY97 the company had operating earnings of $19.68M of which $19.578M was fee and royalty income. This is a big worry for me. But there could be some reasons. 1) they could be rolling money into new markets like the MMC which is not really like operating expenses anyway. 2) Aggressive pricing now to retain design slots, hoping to improve gross margins with much higher volumes later. 3) any other ideas? Jerome? Rex

To: Jerome Wittamer who wrote (3063)	5/22/1998 1:19:00 AM
From: Rex Dwyer	Read Replies (1) \| Respond to of 60323

2Q98 to have lower royalty income. This is another worry. Since royalties drive the bottom line so hard, it doesn't bode well for the EPS in that Q. From 10Q: "gross margins and net income are likely to fluctuate more with changes in license and royalty revenues than with changes in product revenues." Also from the 10Q: "the Company expects product revenues to increase in the second quarter of 1998 relative to the first quarter". Could they expect bigger revenues so they can back off on running royalty revenue through the income statement? I bet that Cindy B has a lot of leeway in recognizing the royalty and license fees. From the 10Q: "The Company currently expects that revenues from patent licenses and royalties will be in the range of $7.0 to $7.5 million in the second quarter of 1998 due to the timing of revenue recognition under the various agreements." This level is still a bit higher than they had in 4Q97 when product revenues were booming. Since I bet Cindy uses royalties to compensate for lower product revenue, the forward looking royalty number gives a clue to the expected product revenue. My prediction, 2Q98 product revenues will be an equal percentage higher than 1Q98 as the royalties will be lower. So, I am guessing about $29.5M to $30M in product revenue, which brings total revenues to a total of ($30M+$7.5M)= $37.5M. The uptrend would be nice. But again, as Jerome has said, this is a 3Q and 4Q story. Rex

To: Jerome Wittamer who wrote (3063)	5/22/1998 1:20:00 AM
From: Rex Dwyer	Respond to of 60323

Smart Media to CompactFlash&#153 sales ratio? This is my biggest worry. Is CompactFlash&#153 still holding its lead? Can someone go through this link below and tell us what the CompactFlash&#153 design-in percentage is?? I know someone did this a few months ago. computers.com Rex

To: Jerome Wittamer who wrote (3063)	5/22/1998 1:22:00 AM
From: Rex Dwyer	Read Replies (3) \| Respond to of 60323

There are still upsides to this story. 1) Design-in activity is still high. 2) Hand held PCs are rolling out. 3) PalmPCs are just beginning, maybe PalmPilots will get CompactFlash&#153. 4) The MMC to be rolled out soon as well, with a major design-in in the bag already. 5) Sub $1000 PCs and lower PC prices should do nothing but help this market. 6) AOL and Kodak are doing the marketing... I still have a strong belief that this company will grow. I feel less strong that they will earn a big profit from that growth. We'll see. I'm still holding and thinking of buying more. Rex SNDK $16 5/8