Analyst Sees SanDisk Mystery Product Involving Music

By Donna Fuscaldo, Of DOW JONES NEWSWIRES, Dow Jones

Flash memory product maker SanDisk Corp. (SNDK) aroused suspicion late last week when it made a cryptic announcement revealing ``major`` news to come during the Cellular Telecommunications & Internet Association mobile industry trade show next week.

The Friday press release prompted a frenzy in option trading on the stock as investors speculated what the news would be. Shares rose to a 52-week high of $ 46.09 before closing at $45.71.

Speculation continued Monday. Some analysts have said SanDisk could be gearing up to announce a product targeted toward the music industry; others predicted a SanDisk-branded mobile phone.

American Technology Research analyst Satya Chillara thinks he has the answer. In a research report Monday the analyst, citing talks with industry sources, said he believes SanDisk will announce a deal with a ``major`` music label in which music albums would be available on SanDisk`s memory cards for use in cellphones.

``This could be a unique announcement in that this would be the first time pre- recorded music would be offered to MP3 Player phones,`` wrote Chillara in a research report. He said it`s another way to bring music to cellphones and could give Apple Computer Inc. (AAPL) and Motorola Inc. (MOT) some competition with their iTunes cellphone.

According to Chillara, if SanDisk does make this type of announcement, he thinks a product will be available for the holiday selling season. Nevertheless, the analyst maintained his hold rating on the stock, due to valuation.

Officials at SanDisk weren`t immediately available to comment. Recently shares of SanDisk were trading down 1.5%, or 70 cents, to $45.01 on volume of 2.3 million. Average daily volume is 5.5 million.

Speaking of SanDisk`s business prospects, Daniel Amir, an analyst at WR Hambrecht + Co., said Monday that SanDisk`s third quarter is tracking ahead of his estimates. ``We believe that SanDisk is seeing orders getting pulled in from October into September, as the (flash memory) cards market appears especially strong,`` wrote the analyst. Amir noted the adoption of flash memory cards in cellphones has already begun.

Both analysts do not own shares of SanDisk nor do their firms have an investment banking relationship with the company.