SecProbe.io

CORRESP
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March 31, 2005

Mr. Rufus Decker

Accounting Branch Chief

United States Securities
and Exchange Commission

450 Fifth Street, N.W.,
Stop 4-5

Washington, D.C. 20549

RE:          Special Devices, Incorporated Form 10-Q
for the quarter ended January 30, 2005 – File No. 333-75869

Dear Mr. Decker:

Enclosed are our
responses to your letter dated March 23, 2005. In order to facilitate your
review, we have included the Staff’s comment followed by our response below. It
is our intention to include these revisions in future filings.

Comments applicable to
your overall filing

1.               Where a comment
below requests additional disclosures or other revisions to be made, please
show us in your supplemental response what the revisions will look like.  These revisions should be included in your
future filings.

Response: The
requested response or additional disclosure is set forth under each of the
Staff’s comments below. These revisions will be included in future filings.

Item 4 – Controls and Procedures,
page 19

2.              You currently
disclose that the principal executive officer and principal financial officer
have concluded that your disclosure controls and procedures are effective,
except as discussed below. Given the exception noted, it remains unclear
whether your principal executive officer and principal financial officer have
concluded that your disclosure controls and procedures are effective. Please revise
your disclosure to state, in clear and unqualified language, the conclusion
reached by your principal executive officer and principal financial officer on
the effectiveness of your disclosure controls and procedures. Please confirm if
your principal executive officer and principal financial officer have concluded
that your disclosure controls and procedures are effective as of January 30,
2005. Otherwise you should amend your Form 10-Q to disclose that given the
identified matter, your disclosure controls and procedures were not effective.

Response: The
disclosure is revised as follows:

ITEM
4. CONTROLS AND PROCEDURES

SDI, under the
supervision and with the participation of its management, including its
principal executive officer and principal financial officer, evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures as of the end of the period covered by this report. Based on this
evaluation, the principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective at January
30, 2005 in reaching a reasonable level of assurance that information required
to be disclosed by us in the reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission’s
rules and forms.

During the quarter ended
January 30, 2005, there was a change in the internal control over
financial reporting (“Internal Control”) as disclosed below that materially
affected, or is reasonably likely to materially affect, Internal Control.

As previously disclosed
in our filing on Form 10-Q/A for the quarter ended August 1, 2004, we
determined that a material weakness existed in our disclosure controls and
procedures and our Internal Control because certain errors were made in accounting
for the separation agreement we entered into during that quarter with our
former chief operating officer. Those errors, which resulted in the restatement
of our financial statements for the quarter ended August 1, 2004, related
to the timing of the recognition of severance expense and recognition of
compensation expense for a deemed modification of stock options. To correct the
identified weakness in our disclosure controls and procedures and our Internal
Control, we instituted procedures in the first quarter of 2005 requiring that
separation agreements be reviewed and a formal assessment be prepared with
respect to the accounting treatment required under generally accepted
accounting principles and that such assessment be subject to an additional
level of review.

A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within SDI have been detected. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected. SDI conducts periodic evaluations
to enhance, where necessary, its procedures and controls.

3.               You currently
disclose that there were no changes in the internal control over financial
reporting that have materially affected or which are reasonably likely to
materially affect internal control, except as disclosed below. Please revise to
state clearly, if correct, that there were changes in your internal control
over financial reporting that occurred during this quarter that have materially
affected, or are reasonably likely to affect, your internal control over
financial reporting. See Item 308 of Regulation S-K.

Response: See our disclosure under comment number 2 above.

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If you or any other
member of the Staff has any questions or would like to discuss these matters at
greater length, please do not hesitate to contact me at (805) 553-1385 or, in
my absence, Louise Pomes, Corporate Controller, at (805) 553-1315.

  Sincerely,

  /s/ James E. Reeder

  James E. Reeder

  Vice President Finance

cc:   Jeffrey Gordon, Division of Corporate Finance

James E.
Siegfried, Partner, PricewaterhouseCoopers LLP

Jane K. Storero,
Esq., BlankRome LLP

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