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

To: James Choi who wrote (3404)	6/30/1998 1:39:00 AM
From: Rex Dwyer	Read Replies (1) \| Respond to of 60323

Rex's testimonial, Since everyone is testifying here and since I am partially responsible for some of the investors in this thread, I'd like to state what I have done recently. I increased my position in the $16 to $17 range as the stock was being buoyed up by well timed PR, thinking it was the bottom. Now I will think twice when regurgitated PR hits the wires. After the news, I now see that the good 3Q98 and 4Q98 that we were all banking on may not be blockbusters after all. The main reason for this, I believe, is the fierce competition and price cutting from Asian Flash manufacturers, especially Hitachi. Hitachi has vowed to become the CompactFlash leader. With the Yen advantage, I fear for SNDK's ability to compete in the product side of their business. But, with investments in the Taiwan factory, they should be able to compete when the demand returns. My feeling is that the company has done well in a completely disastrous market. If good times return, SNDK should do well. The CompactFlash should become a commodity. When it happens, SNDK should see good royalty income. In all, this market should be growing tremendously as cell phones and Win CE boxes hit the mainstream. In the meantime, some Japanese and Korean manufacturers are selling DRAM below cost for cash flow while SNDK is showing a near break-even quarter. I view it as a marginal showing in horrible market conditions. The dangers as I understand them to be are: 1) Asian competitors selling at cost or below. 2) Digital cameras not using the CompactFlash medium. 3) Possible Lexar technology avoiding SNDK's patents. The upsides are: 1) tremendous growth in digital camera usage. 2) growth in the use of Flash memory in cell phones, Win CE, and possibly PalmPilot machines. 3) SNDK's ability to extract a royalty from the market. I would love to hear about these 6 items. In the meantime, this stock could drop to its book value ($7). But I expect a rebound when demand comes back in line. When it does, I expect the stock to return to the high $20s to mid $30s. I know it seems impossible now, but it really can happen. It reminds me of ReadRite in 1993. In the meantime, you may see a rebound as funds finish their dumping of losers in their quarterly window dressing season. Rex $14 5/8

To: James Choi who wrote (3404)	6/30/1998 9:51:00 PM
From: Ojing Eo	Read Replies (1) \| Respond to of 60323

James Choi wrote: >>So, I am not that optimistic about the future of this company >>anymore. There is a risk that CF might become a commodity item >>(like RAM and Hard Disk) and enter a bloody over-supply-based >>price-war in the near future. This is what Michael Dell thinks of the 'commodity' hardware component market. (from upside.com Q:You announced some price cuts because of falling component prices from Asia. Do you expect that to continue throughout 1998? A:I suspect there will be a favorable environment for buying components for a medium-term period, maybe for the next year. Certain countries--you know who they are--never questioned the idea of capital spending. So they rack up this huge debt, spend all this capital and presumably figure at some point in the future they're going to own the world. The strategy didn't work, but in any case, that was their strategy. So if you're a buyer of these components, I guess the good news is that the investments have already been made that are going to affect the production for all of [1998]. Q:The question is [what happens] beyond that period. A:Right. Will they to continue to invest in capacity? If they don't continue to make the capacity investments, they [quickly] fall off the treadmill, and you'd then have grave consequences not only for the equipment guys, but for everybody. Your $1,000 PC becomes a $4,000 PC. If component prices go up too fast, people say, "I'll wait a little longer until I upgrade my PC." Or, "Oh, we didn't need that extra PC yet." These countries and these companies need to have more respect for capital, but not get off the treadmill. If they do, they're putting guns to their heads. Ojing.