Zeev's Turnips Patch-No Politics (ZEEV)

[MONYMAN3]

My take on SNDK for what its worth..............

From a post I made to abother board:

In an article I read in the EETimes dtd 11/24/2003, a market research firm iSuppli was quoted as asserting that the demand for high end cell phones was out stripping supply. They raised their 2003 forcast of handsets from 480M units to 510M. They also moved up their 2004 estimates to 550M handsets. As part of the article there was a quote that most NAND flash memory makers were selling on allocation (which I noted should be good news for companies like LEXR and SNDK.)


This week SNDK and LEXR were roiled by an analyst comments on concerns in the group attributed to talk of rising flash card supply in the spot market and talk of aggressive retail rebates.

SNDK and LEXR were defended by Susquehanna believes that strong demand for NAND flash memory continues while the supply remains tight. Contract pricing for Dec edged up slightly and firm continues to believe that Lexar and SanDisk are key beneficiaries. Notes that the spot market is not a good indicator of supply and demand trends. According to firm's sources, Samsung has forbidden sales of its NAND flash memory devices to the spot market. As a result, the spot market exists due to distributors/agents that are attempting to make short-term profits in an undersupplied market.

Furthermore this very same week SNDK and Toshiba announced a JV: SNDK and Toshiba announce that they intend to cooperate in the construction of a new 300-mm wafer fabrication facility at Toshiba's Yokkaichi operations in order to meet growing demand for NAND flash memory. The move is expected to allow mass production in the new facility to be advanced to the second half of Toshiba's FY2005 from the originally planned FY2006.

NOTE THEY ARE ADVANCING the scheduled production schedule. Is this what companies do that are already seeing pricing pressures and oversupply?

Here for your review are SNDK and LEXRs last 4 Qs numbers:

SNDK
Oct 15 2003 Earnings SNDK beats by $0.15
Sep 15 2003 Guidance SNDK upside preannouncement
Jul 16 2003 Earnings SNDK beats by $0.21
Apr 16 2003 Earnings SNDK beats by $0.15
Jan 22 2003 Earnings SNDK beats by $0.07


Oct 16 2003 Earnings LEXR beats by $0.03
Jul 17 2003 Guidance LEXR upside preannouncement
Jul 17 2003 Earnings LEXR beats by $0.03
Apr 17 2003 Guidance LEXR reaffirms
Apr 17 2003 Earnings LEXR in line
Jan 29 2003 Guidance LEXR warns

Decent recent performance imo. And everything I read suggests that Digital Cameras will be a very hot item this Xmas. Sales of added flash memory for those gift cameras should run into the 1st Q of 2004.

Excerpted from a SNDK press release dated today:


"SanDisk Corporation (Nasdaq:SNDK) today reiterated its positive business outlook for the fourth quarter of this year. In its statement today, the company said, "We are confident about our business prospects for the fourth quarter, as first provided on October 15, 2003. We continue to see high bookings for our products, and the pricing environment remains benign. Retail promotions in the US over the Thanksgiving weekend were very well received and associated sell-through exceeded our expectations. We are continuing to maximize our flash memory supply from both captive and non-captive sources to meet the seasonally strong consumer demand for our products. Our 2003 total revenue is forecasted to exceed $1.0 billion, up from our September projection of $950 million. SanDisk revenues were $541.3 million in 2002."

ARE THEY ASKING FOR A LAWSUIT IF THEY ARE MISLEADING? They are upping revenue guidance by 50M for the entire 2003 year. Since most of the year is done, by inference they are upping Q4 by 50M.

http://stockcharts.com/def/servlet/SC.web?c=sndk,uu[h,a]dacanyay[pb50!b200][vc60][iLi14,3!La12,26,9]...

On a technical basis the on SNDK it has retraced almost 100% of the move from 62.25 to 86.30. Its broken through the 50dma and the occilators are still pointing down. I think that when you see evidence of a bottom, this would be a very nice trade to take. I started buying the Jan 04 70 calls on Friday. Option expiry is after SNDK's tentative earnings report of 1/14/04. I will add to those options on further weakness. I like the risk reward.

Disclosure: Long LEXR common and SNDK calls


My .02 Rob