|Jay and Art,|
Thanks for your reasoned comments on the SanDisk report.
I'm still trying to get a mental picture of the marketplace, from the information we have.
The sales through retailers met expectations, up 50% sequentially. From Eli's comments that the shelves are empty, it doesn't appear that retail is slowing even now. That's a turns business, that is divided between after market, and I suppose those that buy a camera and upgrade the memory in the same purchase.
The OEM business took the hit, down 20% sequentially. This is the part that doesn't make sense to me. Reports from Best Buy, Amazon and others suggest that Digital Cameras were one of their fastest growing categories. How can one of the fastest growing categories at retail produce 20% negative growth? What I suspect:
As capacity increased in the quarter, SanDisk lost OEM business to other manufacturers that unexpectedly (to SanDisk) lowered their prices. I believe in the LV interview Eli mentioned something about competitors with very low prices (?). This doesn't jive with Eli's comments on market share, unless he was talking about dollar market share, not unit market share. And it does fit with the lower units, higher revenue and margins.
I may be way off base on this, but it's the only explanation I can come up with from the contradictory information.
If that's the case, that other manufacturer's are gaining the low margin, low revenue 8 and 16 MB OEM business, then the obvious question is did SanDisk decide not to compete in this low margin business, and concentrate on the more profitable and less commodity aftermarket sales. It's a decision that could logically be made. The result would be that SanDisk would need several quarters for the market to grow enough to replace the lost sales.
Just thinking out loud.
For the LTB&H folks, I think the thing to focus on is that the growth of digital cameras is not ending, just beginning. And the new applications for CF are still coming on line. And now, expectations are very low, an easy target to beat in the future. That's assuming the world as we know it doesn't come to an end, as Zeev is predicting.