Contributing editor Glenn Rogers joins us from sunny California where he's been busy playing around with his latest electronic toy and finding a new stock for us in the process. Glenn is a businessman, entrepreneur, and successful investor who spent much of his life in Canada before moving to the U.S. Here is his report. Glenn Rogers writes:
I recently purchased an iPad after walking in and out of an Apple store several times since it was released in the U.S. a couple of months ago. This is unusual behavior for me since I inevitably have been an early adopter of every new gadget that appears, going back to the first 10-pound cell phone which I used to carry around on a strap.
I have a closet downstairs filled with obsolete technology of every kind. In fact, I have considered opening a museum displaying the steady if uneven march of gadgets that have amused, infuriated, and baffled me (and many other people) over the years. If I could claw back the number of hours I have spent talking to various tech support agents in Bangalore, I'm pretty sure I could have invented and manufactured my own devices many times over.
The reason for my hesitancy in buying an iPad was that I wasn't certain what I would do with it since I already had a Kindle, a laptop, a desktop, and a BlackBerry. I couldn't imagine how this additional piece of hardware would fit into my life. Then I looked down at my stack of Wall Street Journals and New York Times and found my application. I had seen that a number of media companies had quickly put out compelling applications that utilize additional screen space iPad offers and I saw an opportunity to cut down on the number of newspapers pouring into the house every day. With the reduction in subscriptions, I could justify the purchase of yet another gadget!
When I finally crossed the threshold of the Apple store with the serious intent to buy, I had already decided to go for the least expensive wi-fi model. Again, that is not in character since I normally buy most expensive version I can find. But I reasoned that since I was intending to simply consume media on this device, having the low-price model would work perfectly well.
Additionally, my experience with AT&T did not lead me to want an additional contract even if it was month-to-month, particularly since my BlackBerry allows me to access my emails whenever I want. Of course, once I got inside the store they told me that everything was sold out except for the most expensive wi-fi model which was weighing in at $700. Upon reflection, that should have led me to opt for 3G 32 gig version since it was only slightly more expensive and would give me the flexibility for non wi-fi activity if I needed that, which, as it turns out, I do. However, afraid that I might lose my nerve and having an ongoing need for instant gratification I plunked down the $700.
Of course, the problem with being wi-fi dependent is that wi-fi isn't yet available everywhere, which I found out on a recent trip to San Jose for a meeting with eBay. The wi-fi in the hotel was broken and since the iPad has no ability to plug into a wired source for the web I was out of luck. Of course, I defaulted back to my BlackBerry, but anyone who owns a BlackBerry knows that surfing the Internet on one is not a happy experience.
On the other hand, it was great traveling with the iPad in that you don't have to take it out of your case when going through airport security. That removes a significant irritant for those who travel a lot. I found it very easy to use on the plane whether it was watching a movie or reading a book. I also found consuming media on the device to be a great experience. The Financial Times website has been well optimized for the iPad and both The Wall Street Journal and the New York Times have good apps available as well. My guess is these will continue to improve as publishers begin to reap the benefits from this additional point of distribution. (Editor's note: The Globe and Mail is also available for iPad, as well as for Kindle and Sony Reader.)
I mentioned that I own a Kindle and some of you may be trying to decide whether that might be a better device for you than iPad. Although I am a fan of the Kindle, I can tell you that the iPad is significantly better in every way, other than reading in direct sunlight. I downloaded the Kindle application on my iPad and was able to bring over all the books I had on my Kindle without any trouble. The reading experience, particularly at night, is significantly better on the iPad because the screen is backlit. The Kindle forced me to add eight additional lights which dangled over the top of the device and was frankly a pain in the app. Amazon should be commended for getting the e-Book movement going but they are going to have to significantly update their device to keep up with the iPad.
So why this lengthy review of the iPad? First, because Gordon Pape asked me to do it (I think he's also considering buying one). Second, because it's leading up to a stock recommendation. That stock is SanDisk Corp. (NDQ: SNDK) which supplies all the flash memory for the iPad as well as the flash memory for numerous other devices like cameras and portable mp3 players.
Flash memory should not be confused with Adobe Flash, which Steve Jobs is doing his best to put out of business. Flash memory is used in solid-state drives which are becoming increasingly popular in laptop computers and will become more so as the price drops. Solid-state drives run cooler, boot up faster, and are less subject to crashes, unlike the traditional hard drives we've been using. Prices for flash memory are dropping rapidly from $1.90 per gigabyte of flash to a projected $1 per gigabyte which most analysts believe is the price where there will be mass adoption. This price drop is happening at about 50c per year so that 2012 should be a big breakout year for solid-state drives.
SanDisk is the global leader in flash memory cards which most of you probably use in your digital cameras. Samsung is a big player in the flash area as well and is worth your consideration but that stock can only be bought overseas or through the Pink Sheets here in the U.S. and appears to have little to no volume on the over-the-counter exchange. SanDisk is freely traded and despite being up 175% from a year ago is still a buy at Friday's closing price of US$49.02.
The stock trades at a relatively reasonable 13.4 times trailing earnings. Since the company beat the Street estimates by 60% in the last quarter, this tells me that there's more room for it to run. Apple sold well over two million iPads in just two months and there are a number of other manufacturers who are planning to launch tablets, most of which will use SanDisk technology. That will further fuel the company's growth.
The CEO of the company, Eli Harari, worked at Intel and knows how to scale up a business. He also is credited with recognizing that cell phones and cameras would merge which has driven demand for flash memory and will continue to do so for the foreseeable future.
Action now: Buy with a target of $55.
I recently purchased an iPad after walking in and out of an Apple store several times since it was released in the U.S. a couple of months ago. This is unusual behavior for me since I inevitably have been an early adopter of every new gadget that appears, going back to the first 10-pound cell phone which I used to carry around on a strap.
I have a closet downstairs filled with obsolete technology of every kind. In fact, I have considered opening a museum displaying the steady if uneven march of gadgets that have amused, infuriated, and baffled me (and many other people) over the years. If I could claw back the number of hours I have spent talking to various tech support agents in Bangalore, I'm pretty sure I could have invented and manufactured my own devices many times over.
The reason for my hesitancy in buying an iPad was that I wasn't certain what I would do with it since I already had a Kindle, a laptop, a desktop, and a BlackBerry. I couldn't imagine how this additional piece of hardware would fit into my life. Then I looked down at my stack of Wall Street Journals and New York Times and found my application. I had seen that a number of media companies had quickly put out compelling applications that utilize additional screen space iPad offers and I saw an opportunity to cut down on the number of newspapers pouring into the house every day. With the reduction in subscriptions, I could justify the purchase of yet another gadget!
When I finally crossed the threshold of the Apple store with the serious intent to buy, I had already decided to go for the least expensive wi-fi model. Again, that is not in character since I normally buy most expensive version I can find. But I reasoned that since I was intending to simply consume media on this device, having the low-price model would work perfectly well.
Additionally, my experience with AT&T did not lead me to want an additional contract even if it was month-to-month, particularly since my BlackBerry allows me to access my emails whenever I want. Of course, once I got inside the store they told me that everything was sold out except for the most expensive wi-fi model which was weighing in at $700. Upon reflection, that should have led me to opt for 3G 32 gig version since it was only slightly more expensive and would give me the flexibility for non wi-fi activity if I needed that, which, as it turns out, I do. However, afraid that I might lose my nerve and having an ongoing need for instant gratification I plunked down the $700.
Of course, the problem with being wi-fi dependent is that wi-fi isn't yet available everywhere, which I found out on a recent trip to San Jose for a meeting with eBay. The wi-fi in the hotel was broken and since the iPad has no ability to plug into a wired source for the web I was out of luck. Of course, I defaulted back to my BlackBerry, but anyone who owns a BlackBerry knows that surfing the Internet on one is not a happy experience.
On the other hand, it was great traveling with the iPad in that you don't have to take it out of your case when going through airport security. That removes a significant irritant for those who travel a lot. I found it very easy to use on the plane whether it was watching a movie or reading a book. I also found consuming media on the device to be a great experience. The Financial Times website has been well optimized for the iPad and both The Wall Street Journal and the New York Times have good apps available as well. My guess is these will continue to improve as publishers begin to reap the benefits from this additional point of distribution. (Editor's note: The Globe and Mail is also available for iPad, as well as for Kindle and Sony Reader.)
I mentioned that I own a Kindle and some of you may be trying to decide whether that might be a better device for you than iPad. Although I am a fan of the Kindle, I can tell you that the iPad is significantly better in every way, other than reading in direct sunlight. I downloaded the Kindle application on my iPad and was able to bring over all the books I had on my Kindle without any trouble. The reading experience, particularly at night, is significantly better on the iPad because the screen is backlit. The Kindle forced me to add eight additional lights which dangled over the top of the device and was frankly a pain in the app. Amazon should be commended for getting the e-Book movement going but they are going to have to significantly update their device to keep up with the iPad.
So why this lengthy review of the iPad? First, because Gordon Pape asked me to do it (I think he's also considering buying one). Second, because it's leading up to a stock recommendation. That stock is SanDisk Corp. (NDQ: SNDK) which supplies all the flash memory for the iPad as well as the flash memory for numerous other devices like cameras and portable mp3 players.
Flash memory should not be confused with Adobe Flash, which Steve Jobs is doing his best to put out of business. Flash memory is used in solid-state drives which are becoming increasingly popular in laptop computers and will become more so as the price drops. Solid-state drives run cooler, boot up faster, and are less subject to crashes, unlike the traditional hard drives we've been using. Prices for flash memory are dropping rapidly from $1.90 per gigabyte of flash to a projected $1 per gigabyte which most analysts believe is the price where there will be mass adoption. This price drop is happening at about 50c per year so that 2012 should be a big breakout year for solid-state drives.
SanDisk is the global leader in flash memory cards which most of you probably use in your digital cameras. Samsung is a big player in the flash area as well and is worth your consideration but that stock can only be bought overseas or through the Pink Sheets here in the U.S. and appears to have little to no volume on the over-the-counter exchange. SanDisk is freely traded and despite being up 175% from a year ago is still a buy at Friday's closing price of US$49.02.
The stock trades at a relatively reasonable 13.4 times trailing earnings. Since the company beat the Street estimates by 60% in the last quarter, this tells me that there's more room for it to run. Apple sold well over two million iPads in just two months and there are a number of other manufacturers who are planning to launch tablets, most of which will use SanDisk technology. That will further fuel the company's growth.
The CEO of the company, Eli Harari, worked at Intel and knows how to scale up a business. He also is credited with recognizing that cell phones and cameras would merge which has driven demand for flash memory and will continue to do so for the foreseeable future.
Action now: Buy with a target of $55.
