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Friday, May 9, 2008

Sandisk 10Q notes for 1Q:2008

There's an interesting disclosure in the 10Q that they sold 13.9 mil of previously written down inventory in the quarter.

By my reckoning, this increased product gross margins by 190 bps (from 16.4 to 18.3). It's also most of the profits for the quarter

There's continuing language in there that they probably have to finance to meet their off balance sheet fab construction commitments.

They disclosed some of their investment portfolio by category in accordance with a new standard. Unfortunately, by not giving us a comparable there's no way to determine what the change in the health of these assets has been. Last quarter, they had over a billion dollars in munis and about 350k in corporate fixed income. They're going to need cash for these fab commitments and it seems like the portfolio has been getting more illiquid – shifting to long-term, Level 2 investments – Level 2 means there's no exact market for these assets but they have a pretty good idea what they ought to be worth based on anecdotal pricing information. This winds up being a discretionary valuation call, it's not like they can hit a steady bid.

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