SanDisk beats forecasts

SanDisk Corp beat quarterly earnings and revenue forecasts on Thursday after a steep decline in margins on its flash memory chips was not as bad as feared, while the chip maker said it was optimistic about the second half.

By (Reuters)

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Published: Fri 20 Jul 2012, 9:51 AM

Last updated: Tue 7 Apr 2015, 11:33 AM

In a conference call with analysts, SanDisk said it expected third-quarter revenue of $1.15 billion to $1.25 billion, compared with analysts’ forecasts of $1.22 billion, while rising sales of its solid state hard drives should help improve margins by the end of the year.

Shares of SanDisk, whose NAND chips are used in devices such as smartphones and cameras to store data, rose 8 percent to $37.77 in extended trading.

“Looking ahead to the fourth quarter, we expect to benefit from continued sequential growth in sales of our mobile embedded product and SSD’s (solid state hard drives) as well as retail fourth-quarter seasonality,” Chief Financial Officer Judy Bruner said.

SanDisk’s second-quarter gross margins fell to 28.3 percent, from 45.3 percent a year ago. However, it said it expected third-quarter margins to stabilize in the 26-30 percent range before growing in the fourth quarter.

“Even if in September quarter we see margins stabilizing, the company was pretty confident that they see it rising in the final fourth quarter,” RBC Capital Markets analyst Doug Freedman said.

SanDisk earned just $13 million, or 5 cents a share, in the second quarter ended July 1, down from $248 million a year ago. Excluding items it earned 21 cents a share, while revenue fell 25 percent to $1.03 billion.

Analysts had expected a profit of 18 cents a share on $1.02 billion in revenue, according to Thomson Reuters.

Margin recovery

“For the third quarter, we are forecasting that our price decline and cost decline will be relatively balanced, allowing gross margins to stabilize,” Bruner said.

Chipmakers like SanDisk, Micron Technology Inc, Elpida Memory Inc, SK Hynix and Samsung Electronics Co Ltd all ramped up their NAND production capacity in a buoyant market for smartphones and tablets, but a glut in supply drove prices to new lows.

NAND prices have fallen as much as 60 percent in the last year, according to chip industry tracker DRAMeXchange. Analysts tracking SanDisk and the NAND market estimate a 35-40 percent drop in NAND prices this year alone.

But in the second quarter, sales through the retail channel rose 28 percent offsetting lower prices of commodity NAND chips sold to original equipment manufacturers.

SanDisk, unlike some of its peers, also gets significant revenue from retail sales. That includes SanDisk-branded pen drives and hard disk drives sold directly to end customers.

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