Monday, December 11, 2006

Calls of Note Part 7

- Citigroup notes that on Fri, SanDisk (NASDAQ:SNDK) 8K revealed Nelson Chan's departure (EVP, 14-yr SNDK vet, Chan oversaw all pdcts ex handset cards, led the digicam OEM to retail transition, a build out to ~200K retail storefronts, and the MP3 product ramp. Was well-known and liked by retailers, OEM's and the Street.

SNDK attributed to personal reasons, though a gradual internal re-alignment to end mkt silos (the structure of recently-acq'd mSystems) may also be at play.

Firm views as a moderate fundamental and stock negative since Chan's partner+ customer relationships as well as deep retail markets understanding will be hard to replace. Bears will argue timing detracts from 4Q06 results conviction.

Friday's, brutal 16% Dec NAND contract price cut reveals sector vulnerability exiting 4Q, but validates their negative royalty revenue est revisions last week. Street royalty estimate cuts lie ahead as a headwind for the shares.

Shares have lagged QTD but are uncompelling as nt risks balance lt reward.

Reits Hold and $54 tgt.

Notablecalls: SNDK already got hit on Friday. While I think this Citi note will generate some selling interest in the pre mkt I would not be surprised to see buyers step in around recent lows.

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