As our readers know, we have been very negative on SNDK and have made money shorting it.

Today stock dropped $1.79 following cautious comments by Citi. Citi’s comments today are similar to our concerns provided to you long before Citi. It appears that there was fair amount of short selling in the shares today.

We caution against shorting these shares now. The reason is that we are atthe cusp of a big change– pervasive use of solid state drives is coming sooner than most market participants think. SNDK is a natural acquisition target for its partner Toshiba. Disk drive makers such as Seagate and Western Digital have been rumored to be looking at buying SNDK. We have not been able to verify the rumors, but believe that rumors are credible.

As Michael Dell tries to reinvigorate DELL, one possibility is to acquire SNDK and be the first to introduce a full line of moderately priced laptops with solid state drives. It is possible that Hewlett Packard HPQ may want to beat DELL in this realm.

Two dark horse acquirers are Acer and Lenovo.

Suffice to say that we may wake up one fine morning to the news of acquisition of SNDK. Therefor we caution against short selling SNDK. As the stock drops, aggressive accounts may consider accumulating the stock and then selling the stock when it pops on buyout rumors. Consider scaling in right herearound $13 range

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