For the first time after SanDisk Corporation (Nasdaq:SNDK) founder and CEO Dr. Eli Harari dropped the bombshell of his planned year-end resignation, he will speak - at the Flash Memory Summit in California.
Harari will speak about "Why flash in the next decade will be even bigger than you think." But he will not speak about why specifically at the eve of this decade he has decided that it is the right time to hand the reigns over to his partner in founding the company more than twenty years ago, Sanjay Mehrotra.
Two weeks ago, in an interview with "Globes", Harari reiterated that at his age, 65, it was the right time to resign. He also pointed out that he was healthy and wanted to do more with his family.
Harari's explanations seemed very logical, to quit at the top. But I was not entirely convinced that an entrepreneur like him, just when he reaches the top of the world, and on the eve of the decade which will be "bigger than you think", decides to quit at an age which for a long time has not been considered retirement age.
Harari's steps throughout his career, which have brought him to his current peak, have been the type that seemed surprising in the short term, and only after a long time turned out to be brilliant.
For example, when he set up SanDisk, he naturally turned to Eastman Kodak (EK), which was a gorilla at the time, and offered it to invest in SanDisk, because "a day will come when flash will replace film". They agreed, but wanted exclusivity, and while Harari was then desperate for money, he turned down the giant, an illogical move which turned out to be ingenious only after many years. Today, as is known, Kodak is worth only about a tenth of SanDisk on the stock exchange.
Another brave move by Harari, exactly a decade ago, was to link up with Japan's Toshiba. He signed with it on a partnership in which each side would bring its unique patents in the NAND area, and together they would set up facilities based on Toshiba's knowledge in mass production.
Those were the days when America had not yet gotten over the trauma of the 80s and 90s, when Japanese firms were seen as those who "steal" information, especially in production of cars and chips. Looking back, the move to join together is considered brilliant.
The third move that turned out to be brilliant was to turn down Samsung's buyout offer two years ago. Harari explained in the recent interview that US institutional investors - of the largest that there are - exerted then tremendous pressure on his board to accept the offer, but Harari was not convinced and he won over the board. Today the share price is nearly double, and the future is as rosy as ever.
In my opinion, maybe only in another year will we understand why Harari decided suddenly, at the peak of his career, in the summer of 2010, to be a good grandfather to his grandchildren.
SanDisk's business environment in the next year and a half is a flash market that leans toward a shortage. No one knows how sharp it will be, because it depends on the strength of demand. The new facilities being built today by flash producers will only become operational in 2011.
In the conversation, Harari said that he prefers a situation of shortage, even if SanDisk is forced to buy chips from competitors based on existing agreements, than one of oversupply, like two years ago, which destroyed the market, nearly threatening its existence.
Harari also said that in his opinion, SanDisk has at least several quarters' advantage over its competitors with its X3 technology (3 bytes per memory cell)- "It's like getting additional production capability at no charge." At the conference this week other SanDisk executives will also be present, and I assume that new developments will be announced about the market that is set to be to be among the largest in the next decade - the SSD market, storing details on flash based solutions instead of on hard drives.
That is also a market which Intel (INTC) announced a while ago that it sees as strategic. We will also hear from Intel at the conference, but there is still heavy fog surrounding its continued involvement in producing the NAND chips on which the SSD solutions are built.
From the conversation with Harari, I understood that it definitely is possible that Intel has decided to get out of producing NAND, and to find other supply options for its SSD solutions.
Harari repeated at the interview his advice to Intel - "If you want to know the time, you don’t need to buy the watch". This is advice that he has given Intel more than once before, when he was referring to the fact that SanDisk-Toshiba can supply it with NAND. If Micron Technology, Intel's partner in what was a NAND producing venture, continues to produce NAND alone, it will need to sign a licensing agreement with SanDisk and pay it royalties.
When I asked if and when this would happen, I got from Harari his only "no comment" in that interview.
Published by Globes [online], Israel business news - www.globes-online.com - on August 17, 2010
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