Suiting UpRegardless, some investors believe that the STMicro disputes ultimately pose little threat to SanDisk in the near term because they could take years to wind through the courts. But any resolution wouldn't clean SanDisk's legal plate. The company is embroiled in two other patent suits -- one against rival Infineon ( IFX) and another involving Memorex, Ritek and Pretec Electronics. While the amount of lawsuits has the potential to scare off some investors, they're an important part of doing business for a technology company, legal experts say. "One might argue that SanDisk is a bit more aggressive than other companies, but they have a large number of patents in their area," says Bruce Wieder, a patent lawyer in Alexandria, Va., with Buchanan Ingersoll and adjunct professor at the Georgetown University Law Center. But "that they would move strongly to protect the advantages they have because of their patents is not unusual." For SanDisk, licensing and royalty fees related to its intellectual property generate about 10% of sales. But Deutsche Bank analyst Ben Lynch figures that licensing and royalty fees have generated all of SanDisk's free cash flow since 1994 and have even funded the rest of the business. He calculated that free cash flow will total $603 million from 1994 to 2005, while royalty revenue is expected to total $783 million.
|Source: Baseline |
* = Estimate