SanDisk Corp (SNDK)

NAND flash – it's everywhere: mobile phones, video games, PDA's, digital cameras, camcorders, television set-top boxes (think TiVo) and USB drives. It's even in your cars (Well – in the newer models). We're now hearing that the next generation of laptops will not have hard drives with moving parts, but rather lighter, more reliable NAND flash drives.

Current NAND consumption is estimated at 1 trillion MB but the entire NAND landscape will be unrecognizable in the next 36 months. Estimated consumption by 2010 is – wait for it - 12.9 trillion MB – mind-blowing growth! (Gartner, May 2006). Makes sense when you consider the entrance of 3G mobile phones with MP3 and GPS capabilities, and a 3 to 7 megapixel camera. These handsets will require significantly larger amounts of memory than we are using today.

OK – here's the $64,000 question? What type of company is best placed to capitalize on this growth?

A company that:
(a) Sells flash memory cards for a wide range of digital devices.
(b) Sells digital devices (such as MP3 players).
(c) Produces NAND flash chips.

Sandisk (SNDK) is a company that does all of the above:
- It has highly efficient NAND chip facilities (fabs), jointly owned with Toshiba.
- It is the dominant player in the memory card market – 31% according to IDC.
- With 18% market share in the U.S., it is #2 in the MP3 player market. Its “iPod killer” – Sansa offers more memory at a better price than the iPod. And get this: when Apple sells its iPod, Sandisk continues to earn revenue in the form of royalties from Samsung, who make the chips for Apple's iPods.
- Speaking of Licensing revenue – it grew 31% last year to $78 million.
And now for the 'piece de resistance' (French for 'the kicker', the icing on the cake, the cherry on top…). The M-Systems acquisition was just approved at $1.55 billion – and with 2006 revenues coming in at close to, if not better than $1 billion – that's a price to sales of about 1.55 – a phenomenal bargain.

But wait – there's more:

M-systems' X4 technology: The experts said it was impossible and that it couldn't be done but we fools know better than to heed the experts.

X4 allows NAND flash manufacturers to produce twice as much memory on the same wafer, than is currently being produced. This will translate to a 30 percent cost reduction in producing a 1 gigabyte NAND flash wafer – which will fatten Sandisk's margins.

The fundamentals:
- A solid balance sheet – 3 times total assets to total liabilities.
- $1.3 billion in cash – (that's $6.50 per share in cash).
- Consistent 3-year Revenue & Earnings Growth (47% and 51% respectively)
- ROE: 24.2%
- Free Cash flow per share $0.92
- 5 year estimated consensus earnings growth 20%
- PEG Ratio: 0.92
- According to Thomson / First-call 14 analysts cover the company with a mean/median target price of around $66 – representing 30% upside to current prices.

SOWHATCHOOWAITINFO?

There is always the threat of disruptive technologies, low-cost upstarts, changing consumer demands. Why am I still bullish on this stock? Becuase I believe SNDK is well positioned to remain in the pole position for flash memory, and I believe that flash memory will assume the role that hard drives have held for much of the past decade.

Bought on Cramer's advice. I think that was pretty much the day it started headed south. I learned my lesson.

This company has recently been beat up by the market and I expect a full recovery to its previous highs in the mid to upper 70's due to the strong product line, the acquisition of new technology in recent months and their ability to remain competitive with Apple.

Declining margins, intense competition, and a negative trend in EPS growth. Negative EPS growth continued in latest quarter as SNDK sank to a loss when the street thought they were going to make money. Stay away.

Sandisk is now a gorilla after purchasing M-systems. I am adding this one to my real world portfolio for the long term.

When the take over rumors end, this stock will come back to earth hard. Even in a bad economy, SNDK losses in the 4th quarter where HUGE. The funny, thing is that i like their products. Even in better times only their patent license fees were keeping them in the black, so this has been a long time coming.

Time to put my mouth where my money is.

I've owned this for about 2.5 years, and with some recent additional purchases I'm currently overweighted on it, but I've been reluctant to put it in my caps portfolio because it's somewhat volatile.

But under 44 is too good a price point; I'm even considering adding more to my real portfolio.

The case against Sandisk in a nutshell is:

1) Micron (which recently acquired Lexar, a money-losing operation that was repeatedly spanked silly by Sandisk) + Intel are tagteaming to compete with Sandisk.

2) flash pricing have been dropping;

3) there's a risk of oversupply, driving prices even lower;

(there are other risks, but I believe those are the biggies).

I've been hearing arguments 2 and 3 for years. The thing to remember is that Sandisk frequently *drives* prices down because they have an efficient operation that their competitors can't compete with (see exhibit A: Lexar).

Micron/Intel is a new wrinkle, but IMHO Micron is an OK company with a mediocre management; not bad, but these folks have a long track record of mediocrity.

I respect Intel, but really, they appear to have their hands full with AMD and rolling out their new processors.

Sandisk isn't exactly a microcap (8.6B).

I could go on-and-on. Bottom line this is an easy thumbs-up for me

price competition drags down the margin

Sandisk is taking advantage of its position in the NAND industry by introducing new products with innovative designs. New x4 technology will revolutionaize the industry much like MLC did, if not more. For a while tech was drifting with little innovation, then came flash memory. Sandisk is the best positioned to fully take advantage of this explosive technology.

Here are 12 reasons SNDK will head up from these levels (currently around $42) and only 1-2 why we might stay here or trade off to $40 at the absolute lowest. I like 12:1 odds. This doesn't even take into account we are at historically low P/E multiple (roughly 12.2x forward on a cash normalized basis) and have 2 or 3 of the largest demand drivers in history coming out in the next 6-9 months...

Reasons we go higher:

1. x4 goes into production
2. Jan 8th CES has a new media player or SSD drive announcement (90% chance we get at least one of these announcements)
3. Hynix or MU licensing agreement
4. New terms announced for Samsung licensing of x4 or renewal of juicy 6.5% MLC license
5. Short covering begins as no jackass stays short into CES and Jan 30 earnings
6. Jan 30 earnings show ASP declines are within guidance and NAND supply is overexaggerated
7. Jan 30 earnings show margin improvement due to early synergies from m-systems
8. iPhone announcement is huge driver of NAND flash
9. SSD drives announced by several manufacturers at CES is a huge unexpected demand driver for NAND in 1H 2007
10. Dell announces first SSD hard drive in partnership with m-systems (I read this on another site but it is still unconfirmed at this point)
11. Vista ReadyBoost and Hybrid Drive are officially announced
12. U3 announcement for Windows Vista and Office native support

Reasons SNDK goes down to $40, or at WORST $37:

1. ASP declines are much larger than the 20% guidance - which is almost moot because when ASPs decline dramatically the demand for new applications and products goes up in a linear fashion. A little pain now (if we even get any) will be rewarded with SSDs coming online MUCH faster than expected. Its not IF, its just WHEN.

Major NAND Flash manuf.; is or can match low-cost producer. Holder of many fundamental patents on the technology which generates addl revenue stream. And vertically integrated into a large NAND end-market: music players, generating addl GM $ for those NAND units.

SNDK has been beaten down from it's yearly highs, and it puts out innovative, quality products. They have already created a 32GB laptop flash hard drive which is not nearly as susceptible to heat and vibrations as a regular hard drive, uses less power, and has a seek time roughly 100 times faster. Everyone is going the way of flash memory. Next year, expect to see flash integrated into hard drives, and a few years after that, spinning hard drives will be obsolete. Sandisk, being the largest flash manufacturer, obviously stands to benefit.

Sandisk is always coming up with new technology, and it has just introduced a 32 gig, 1.8 solid state drive as a drop-in replacement for the standard mechanical hard disk drive. It is aimed at the enterprise users, but will soon be mass marketed. (Quoted from MSN Money)

SNDK has fallen hard, too hard perhaps. Let’s take a look and see.
Key Statistics http://finance.yahoo.com/q/ks?s=SNDK
It is not often I see a tech company, even a commodity tech company selling at book. What’s up? Is SanDisk going out of business? Are they losing market share or gobs of cash? No, no and no again.

2007 Annual Report http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?dcn=0000950134-08-003259&Type=HTML
Q4 2007 Conference Call http://seekingalpha.com/article/62011-sandisk-q4-2007-earnings-call-transcript?page=-1

Positives
- Majority international sales, tick the exchange rate bonus box.
- PIV of 54%
- A wonky but definite EPC staircase, based on Sand’s IETC spreadsheet.
- Excellent reward to risk profile. As SNDK are trading at close to book, 1.02, and with a price to tangible book of 1.33 downside is limited. $20 upside to IV with $3 downside taking SNDK below book.
- Bad news is already priced. Any misses should have minimal impact while good results should result in good gains. According to my records in the 24 quarters since 2002, SNDK have beaten estimates 23 times.
- Short interest has been falling, currently 6%
- Industry leader investing almost 11% of sales in R&D

Cheers
Dean

Notes:
- They may have some ARS exposure in their investments, but I can find no quantified amount. F-9 on annual report. On page F-12 they breakdown the amounts, main investments in municipal notes and bonds.
- Lousy ROE, 4.5

Solid State Hard drives are coming. SanDisk is in the right place if they can capitalize.

A star in the reckoning is what SanDisk (SNDK) portrays. The world's largest flash memory card maker, designs and markets flash storage card products used in a variety of consumer electronics products naming digital cameras, mobile phones, USB drives, gaming devices and MP3 players. Generating bulk of its revenue through retail channels, it engrosses more than 200,000 storefronts worldwide.

SanDisk has established a pioneer position in the flash memory market by developing and patenting flash card standards such as CompactFlash, thereby adding to its top-line via royalty revenue. Additionally, access to captive memory chip supply through its joint venture with Toshiba, envisages a key strategic edge that allows the company to stay on the cutting edge of processing technology and endows it with enough opportunities to nurture.

Lately, growth from increasing demand for flash memory in a variety of consumer products has spiked up the company’s products demand. Endorsing the same, its revenues surged 27% in the third-quarter of 2006. Going forward, SanDisk expects to follow the suite and anticipates a strong double-digit growth in 2007. Going gets easy for SanDisk, with its acquisition of msystems Ltd in late 2006, which would bolster SNDK's position in the handset and portable media player markets and will be accretive to earnings during the latter half of 2007.

Furthermore, it has able to overcome the intense pricing pressure of the flash memory market in recent years, thanks to an advantageous cost structure. Its integrated business model differentiates the company against peers as it helps the firm get a better gauge of end-market demand, plan capacity expansion and helps it to reduce cost burden in a downturn scenario.

A debt-free balance sheet boasting about $2.5 billion in cash and investments, places SanDisk in a sound financial position. Thanks to its cost advantage and royalty revenue stream, SanDisk is poised to be an eventual winner in the market.

fast money big decliner in tech

CEO- honest about weak earnings lately. CEO has 25 years in this market area. Overseas sales are strong. Euro up which helps. Way off highs. Will stay course and come out on top. Good products. BEST REASON: all the know it all's are killing them whenever possible, cant get worse, its at a bottom of sorts.