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

To: Craig Freeman who wrote (3358)	6/22/1998 1:13:00 AM
From: Yakov Lurye	Read Replies (1) \| Respond to of 60323

[SNDK Calls]. Craig, which calls did you buy? I did something similar - sold the stock (in at 20.5, out at 13.5 - ouch!!!), bought instead a mix of Jan. 12.5/15/17.5 calls. Should've probably sit still or stick with the in-money calls, but desperate times call for desperate measures <g>. Basically, I still like SNDK's position - they have a cushion from royalties, and as a result managed not to lose money even during the bad quarter. The way I read the warning statement, they ran into a combination of flat demand, lower ASPs and lower royalties (probably, caused by falling yen and flat demand). In an optimistic scenario, demand should pick up once the camera manufacturers start ramping up production for the Christmas season. This may lead to increased revenues (so far SNDK is talking about reduced gross margins, not about negative gross margins as is the case with MU), somewhat higher royalties, etc. SNDK is introducing new high capacity products - this also should help the margins. A positive settlement with Lexar would be a real gift... Some possible negatives that go beyond the seasonality of demand 1)there seems to be some serious distribution problem in Japan -otherwise, why should they go into direct sales? Any numbers related to sales distribution by region? 2)they may have antagonized some analysts by telling them in May that orders are firming up - that will be a serious problem. At least, with GS reiterating their support, there are some big firms in SNDK corner. 3) I have no idea if SNDK is currently the low-cost producer. An indirect indication would be some competitors reporting good quarter. Does anybody have any information on how are competitors like Lexar doing? We'll see what happens next. Good luck, Y.