By Don Clark And Michael Calia
SanDisk Corp. warned of lower-than-expected results for its
fourth quarter, spurring fears that a smartphone-driven surge in
the memory chip market could be slowing.
The Silicon Valley company's shares plunged 14% on the news.
Shares of Micron Technology Inc., another memory chip specialist,
slid nearly 6%.
SanDisk attributed weaker revenue and gross profit margin on
sales of chips known as NAND flash memory for mobile devices as
well as data storage cards and other products sold at retail. It
didn't identify a particular customer, but some analysts suspected
slower smartphone sales by Samsung Electronics Co. could be a
factor.
Samsung representatives didn't respond to requests for comment.
A SanDisk spokesman declined to provide additional comment until
the company reports fourth-quarter results on Jan. 21.
Sanjay Mehrotra, SanDisk's chief executive, sounded upbeat in an
interview during last week's Consumer Electronics Show,
particularly about the company's effort to become a bigger player
in equipment based on flash memory chips that is being used in
corporate data centers. SanDisk last summer bought Fusion-io Inc.,
which specializes in products that add flash-based data storage to
servers, for $1.1 billion.
"We are in the very early innings of the flash transformation of
the data center," Mr. Mehrotra said.
Memory chips have long been associated with storing data in
personal computers, particularly a variety known as DRAM, for
dynamic random-access memory. The business was historically known
for sharp boom and bust periods, however, as companies boost
production and cause prices to fall.
Demand from smartphones and other products has caused unusual
price stability lately, buoying the share prices of companies like
SanDisk and Micron. Jim Handy, who tracks the market for the
research firm Objective Analysis, said chip prices have been
relatively stable since July 2012.
"I've been predicting that prices would remain stable until
2017," Mr. Handy said. "If I'm right, that would be the longest
period of stability in the history of the industry."
But there may be short-term bumps along the way. Douglas
Freedman, an analyst with RBC Capital Markets, said any slowdown in
chip purchases by Samsung in the fourth quarter could quickly turn
around as the company gradually begins making more phones.
Another issue is the long-term health of add-on memory cards and
other devices sold at retail, as some customers are relying more on
built-in storage that comes with new devices.
"I think SanDisk was expecting the retail market to be a little
bit more robust," Mr. Freedman said.
Mr. Freedman added that he was surprised SanDisk didn't get a
bigger boost from sales to Apple Inc., which is believed to have
experienced a big jump in sales of new iPhones in the quarter ended
in December.
SanDisk on Monday estimated that its total revenue for the
period ended Dec. 28 will be $1.73 billion, about flat with the
year-earlier period and below its previously anticipated range of
$1.8 billion to $1.85 billion.
Write to Don Clark at don.clark@wsj.com and Michael Calia at
michael.calia@wsj.com
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