By Don Clark
SanDisk Corp. delivered another grim forecast of its business
prospects, pointing to issues that seem more specific to the
company than the broader electronics industry.
The company, a major maker of flash-memory chips and products
that use them, on Thursday cut its outlook for the current quarter
and for the year. SanDisk's projection caused its shares to plummet
as much as 19% to a new 52-week low.
The plunge in SanDisk shares followed another drop in January
when the Milpitas, Calif., company projected disappointing
fourth-quarter results--later reporting a 40% drop in profit--and
pointed to weak results for the first half of the year.
"They've had a series of disappointments," said Ambrish
Srivastava, an analyst at BMO Capital Markets.
Thursday's SanDisk forecast also came on the heels of a recent
revenue warning from Intel Corp., the biggest maker of processor
chips used in computers. Negative factors affecting many companies
include the rising value of the dollar versus foreign currencies,
which in some cases has hurt sales by making the price of U.S.
goods more expensive to customers abroad.
But analysts who track SanDisk mainly point to its own miscues.
Shares of Micron Technology Inc., another big maker of flash memory
chips, rose 1.1% Thursday.
Flash memory has long been used in consumer products like
smartphones and tablets, and increasingly in hardware that stores
data from server systems. SanDisk originally was known mainly for
storage cards and thumb drives that use such chips, but it also
sells them separately as part of a manufacturing joint venture with
Toshiba Corp.
Demand for such chips has been growing steadily, but companies
frequently get in trouble when they make too much of particular
products, leading to sharp price declines, or can't make enough of
them.
In January, SanDisk pointed to production snafus, disclosing
that its inventories had fallen because of factors that included
maintenance issues with production lines in Japan and a
lower-than-expected yield of defect-free chips.
The company also said in January that it had lost a major
customer for its solid-state drives, or SSDs, flash-based devices
that store data in computers. SanDisk didn't name the company, but
Mr. Srivastava and other analysts believe Apple Inc. switched to
SSDs from Samsung Electronics Co. for some computers. Neither Apple
nor Samsung have commented on the matter.
On Thursday, SanDisk pointed to additional problems, including
delays in customer testing and approval of certain products for
purchase. It also cited lower pricing of some products and
lower-than-expected sales of products to enterprises, an area
SanDisk had identified as a major growth opportunity, leading to
high hopes among some investors.
"That's the crown jewel of SanDisk," said Nomura analyst Romit
Shah.
Combining the latest factors with its prior struggle to build
inventories, SanDisk said it expects to post revenue of $1.3
billion for the quarter ending March 29, compared with the $1.4
billion to $1.45 billion it had forecast in January.
"We are disappointed with our financial outlook," said Sanjay
Mehrotra, SanDisk's chief executive, in prepared remarks. "We will
work through these headwinds, leveraging our compelling product
road map and broadening customer base."
The company on Thursday said its full-year revenue would be
lower than its previous guidance, but it didn't specify by how
much. The company also said it is postponing an investor meeting
that had been scheduled for May to an unspecified future date.
In January, the company projected revenue of $6.5 billion to
$6.8 billion for the year, compared with analysts's expectations at
the time of $7.23 billion.
Chelsey Dulaney and Maureen Farrell contributed to this
article.
Write to Don Clark at don.clark@wsj.com
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