My Stock Winners

It was very interesting to read the conference call from Cisco Systems. The chief executive officer, Mr. John Chambers, basically said that the “killer app” is video. The part of Cisco that had the highest margins was Scientific Atlanta, which makes the set-top boxes for video.
To have video as the killer app means that there has to be a lot of bandwidth that is speedy.
Yesterday, as well, Steve Jobs said that DRM should be eliminated, so that all digital media can be interchangeable and used on all digital media players.
What we are seeing here, is a change of the foundations, of digital media.
The next generation of media players will need much more memory to be useful. That means, of course, that high density and quality NAND flash will have to be available and AFFORDABLE.
Steve Jobs, yesterday, also said that margins are improving for his products, because of the decrease in the price of NAND flash.
When you put all of this together with Eli’s presentation at Stanford, you realize what it all means.
In his presentation, he basically said that the digital photo business was only for the early adopters until the Internet became available. Then everybody wanted to get digital cameras, which in turn needed digital film, which was the flash card.
We are now at a very similar point in time. Now, however, as John Chambers said, the killer app is video. There will be a huge demand for quality high-capacity X4 MLC NAND flash.
Who will make this NAND flash? Well, it will be SanDisk Toshiba in Fab 3 and later on in Fab

4. These will be the most cost-effective fabs on the planet. Therefore, they will be the low-cost provider and that means that all the other manufacturers, will either have to license their technology or else switch to another type of memory.
You can now see why Eli was so proud at the CES to present all of SanDisk’s new products. The USB TV product as well as digital media players.
I think, that most of this media will be transferred by high-speed wireless. That probably will be a combination of cell phones, WiFi, Wi-Lan, and other transmissions.
Unless, you have fiber-optic cables, wires will not be able to do the job.
All of these products need encryption. It was clear at the RSA conference that encryption is a very big topic.
Remember, Rim started with an e-mail product about eight years ago and look where it is now. The encryption was done by another Waterloo, Ontario company called Certicom. They have ECC TECHNOLOGY which is now approved by the national security agency. The encryption is in the device.
All of these events are coalescing at the same time.
Therefore, I think we are about to see an order of magnitude change in the delivery and products for digital media. Eli had the vision and has set up SanDisk to be one of the most important cogs in that wheel.
The crash in NAND price, that we see now, is basically the liquidation of old technology NAND.
The high density quality NAND will be in great demand and that is the reason that the new fabs are being built. Per megabit, they are cheap because of the increased size of the wafer and 56 nm architecture.
Remember Moore’s Law and the fact that everyone thought we were at the limit. Both IBM/Toshiba/AMD, and Intel, have shown new materials which will make the flash chip architecture even smaller.
That means that the cost per megabit is going to be exponentially cheaper once again.
In summary, all the companies noted above, are probably very good investments to buy now. Analysts, as a rule, do not have a lot of vision and are always stymied by marked changes in technology. I am pretty sure that this will happen. We will see what is said today in SanDisk’s conference. I think we will see much more of the future at SanDisk’s investors meeting in late February.