Many times the timing of a company's release of its financial report is terrible, without any connection to its actual results, because exactly at that point the whole market hits an air pocket. That is what happened to SanDisk Corporation (Nasdaq:SNDK) on Friday, when its share fell nearly 12%.
SanDisk has always been a favorite with shortsellers, since it is a chip company, and therefore is easily labeled as a "commodities company". That is despite the fact that it is well known that the company is a technology trailblazer that knows very well how to defend its patents the opposite of the definition of "commodities".
Whoever does not know, should go ask Steve Jobs why he decided that only NAND flash memory, a technology which brings SanDisk hundreds of millions of dollars in royalties every year, suits him as an ideal solution for data storage on all of Apple's gadgets.
SanDisk founder and CEO Dr. Eli Harari, was so frustrated on Friday by the collapse of the share, that he hinted for the first time at a business connection with Apple.
Harari told Reuters that he was at the iPad launch, and was "all smiles", because devices like it, with multimedia features, will create a "huge demand for flash."
When he was asked if SanDisk sells to Apple, he did not answer directly but said that SanDisk sells its flash "to the top 10 handset makers". In my opinion, that is an indirect confirmation.
In another two months, when the first iPad will be on the market, and its inner components will be listed on various websites, perhaps we will know if Apple chose SanDisk's pSSD solution for models with high storage capacity of 64 gigabytes, as they were chosen recently for mobile computers of Sony and LG.
When you are considered a "commodities" company like SanDisk, and you earn over $1 per share in a quarter, as SanDisk did in the fourth quarter, then your share price in today's market falls from $30 per share. But if you are Amazon, which puts into boxes and sells items that other people write or develop, and succeed through efficient logistics to earn $0.85 in a quarter, like Amazon did in the fourth quarter, today's market gives you a share price more than four times higher, at $125.
After SanDisk's results, Goldman Sachs analyst James Covello revised his earnings per share forecast for SanDisk upward by tens of percentage points, from the current quarter out to and including 2011, when in his opinion it will earn $2.70. That is an 86% jump from his previous estimate of $1.45 per share. But bottom line, Covello's stunning conclusion is that while before his update SanDisk's share was worth $24, after his sharply higher estimates, he says the share is worth the same $24, to the shortseller's delight.
Portfolio adjustments Elron, Microvision out; Radware in
Today, I am making a few changes in the makeup of my portfolio tracked by "Globes". I am taking out Elron Electronic Industries Ltd. (TASE: ELRN) after it delisted itself from Nasdaq, and this portfolio does not follow shares that only trade on the Tel Aviv Stock Exchange (TASE). I am also departing from Microvision (Nasdaq: MVIS) , a US dream stock that is supposed to begin sales this year of a unique projector that it developed, for projecting video content from a mobile phone on to any external surface, such as walls. In my opinion, the company reached the market too late, because with the iPad, with a monitor significantly larger than a mobile phone's screen, the projector does not seem relevant to me, except to a now-smaller market niche.
Additionally, I am adding Radware Ltd. (Nasdaq: RDWR) to the portfolio. As I wrote not long ago, the company recently rose to a new level. Among other reasons was its quick and brilliant acquisition about a year ago of rival Alteon, a firm which had belonged to Nortel, which went bankrupt. The purchase brought Radware primarily many new top tier customers, but also gave it several complete product lines.
For reasons specific to Radware, crisis reached it much before the global crisis, so it was better prepared during the global collapse last year and was nearly unhurt by it. Among other things, it reorganized its entire management structure under founder and CEO Roy Zisapel, and we have seen the results in the fact that for two consecutive quarters it has issued positive updates.
Oscar Gruss analyst Jonathan Kreizman gives Radware a "Buy" rating, and forecasts the company to end 2010 with $133 million revenue, and net profit of $17 million.
Published by Globes [online], Israel business news - www.globes-online.com - on February 2, 2010
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