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

To: Ausdauer who wrote (4876)	2/24/1999 1:31:00 PM
From: Tumbleweed	Read Replies (1) \| Respond to of 60323

SanDisk: Rebound Story Continues (from Yahoo) [ BTW, hopefully once we break through 28 decisively ?today? this barrier caused by the share issue last year will be gone for good. ] The tide has certainly shifted for SanDisk. Another analyst upgrade on Monday resulted in a 1-3/4 point gain for the maker of flash memory chips, which are used in digital cameras and other consumer electronic devices. This stock suffered through a brutal slide for much of last year, but the gain Monday extends an extraordinary rebound in recent months. When we profiled SanDisk last October, we remarked on favorable developments that lifted the share price from $5 to $9 then. Four months later, SanDisk is trading at $26-3/8. The main catalyst for this turnaround is the surging popularity of digital cameras. As with most revolutionary technologies in consumer electronics, the hype for digital cameras was way ahead of the reality. Two and three years ago, digital cameras were widely touted as "poised for explosive growth and mass market penetration." It's taken until now for that to happen, but happening it surely is. Digital camera sales are expected to soar from less than 3 million units in 1997 to around 30 million in 2002. That's good news for SanDisk (Nasdaq:SNDK - news) which leads the market for flash memory chips that serve as the film in digital cameras. Handheld PCs are also taking off. Hewlett-Packard (NYSE:HWP - news) recently launched the Jornada line of handheld PCs, which include a specific slot for SanDisk's CompactFlash memory cards. HP will sell the cards as accessories, and SanDisk has spent the past year aggressively building a retail network of more than 4,000 stores to distribute its products. SanDisk's CompactFlash memory cards have a dominant market share, somewhere in the neighborhood of 60%-70%, in the small but fast-growing digital camera market. Design wins have been the key to success, since the cameras must be built to work with a specific type of flash memory. SanDisk has licensed its CompactFlash technology to some chip makers, but several others like Toshiba are pushing their own versions. Brutal price competition has offset increases in units shipped, resulting in lower revenues last year and a series of earnings disappointments. But SanDisk's design wins with the vast majority of major camera makers put it in the driver seat as the market matures. SanDisk's CompactFlash cards are currently available in 4MB to 48MB sizes, but the company is developing 128MB and 256MB products for introduction this year. It expects these leading-edge designs with lower production costs to fatten up profit margins considerably. The "Flash" in CompactFlash has nothing to do with a flash of light for the camera, rather it is a type of memory chip that stores data even after the power source is turned off. In the case of digital cameras, the removable card has a flash memory chip on it which stores the digital images. The images can be quickly downloaded from the card onto a computer, making it incredibly convenient to snap pictures and immediately put them onto the Internet, send by email, or insert into desktop publishing documents. The quality of digital photos and the price of the cameras have been a major barrier to this technology becoming mainstream, but both are moving rapidly in the right direction (quality up, prices down) to where the market is finally taking off. Initially, buyers were primarily using them for real estate, insurance, and desktop publishing. The consumer market lagged until prices fell far enough but this past holiday season appeared to be a breakthrough, driven by models in the $200-$500 range. Other elements are falling into place to spur the market. Last year Kodak (NYSE:EK - news) introduced Picture Network, where for $4.95 a month people can store pictures on the Internet - a sort of photo-album version of web hosting services. AOL (NYSE:AOL - news) has an extensive digital camera area catering to consumers interested in jumping on the digital revolution. Opinions vary greatly on how big the market will be for digital cameras. Most agree the question isn't whether digital cameras can supplant regular cameras, but how quickly they will be adopted as an additional accessory. A good analogy is microwave ovens and conventional ovens--most homes now have both, each used for what it does best. Digital cameras are but one application for flash memory chips from SanDisk. The ability to store data when the power is shut off makes these chips ideal for use in portable CD players and a variety of wireless communication devices such as cellular phones and handheld (palmtop) PCs. These products need to store and send messages, faxes etc. not to mention retain the programming code to run them. SanDisk's rebound obviously reflects the promising market for all of these consumer electronics, but with the stock having come back so sharply, it needs some tangible results to sustain the bullish trend. After repeatedly disappointing with earnings last year, SanDisk delivered a positive surprise last month. Fourth quarter earnings per share beat the analyst consensus of $0.10 by 3 cents, and 1998 EPS came in at $0.43. That still worked out to a decline of 45% compared to 1997, but analysts project a 64% gain this year to $0.70, with $0.95 forecast for 2000.