UPDATE 2-Weak DRAM prices hurt Smart Modular results, outlook

Thu Dec 16, 2010 6:50pm EST

* Q1 adj EPS $0.27 vs est $0.25

* Q1 rev $216.4 mln vs est $218.2 mln

* Sees Q2 adj EPS $0.09-$0.11 vs est $0.19

* Sees Q2 sales $165-$185 mln vs est $197.4 mln

* Shares down 10 pct after market

(Recasts, adds analyst comment, conference call details, updates share movement)

By Siddharth Cavale

Dec 16 (Reuters) - Memory chipmaker Smart Modular Technologies SMOD.O said a continuing fall in the prices of DRAM chips hurt first-quarter results and would pressure the second quarter as well, sending its shares down 10 percent.

Growing supply of DRAM memory chips and stalled demand growth have brought a quick end to the sector's one-year boom and pressured the profits at top memory chipmaker's like Samsung Electronics (005930.KS), Hynix Semiconductor (000660.KS) and Elpida Memory 6665.T.

Smart Modular said prices of DRAM chips were decelerating at 20-25 percent, hurting profits, especially in its key Brazil markets that account for over half of its revenue.

Oppenheimer & Co analyst Gary Hsueh, however, believes that if Smart Modular is able to better matchup incoming DRAM-procured parts and outgoing module-selling parts, then it could cushion it margins.

"Otherwise it is tough to see them get out of this situation."

However, Smart Modular expects its enterprise solid state storage and Brazil flash business initiatives to drive growth.

The market for solid state drives, which are faster and more rugged than hard drives, is growing as data center managers look for ways to retrieve information faster, especially for applications like video streaming.

PRESSURES STILL REMAIN

Newark, California-based Smart Modular guided a second quarter well below analyst expectations. It forecast adjusted earnings of 9-11 cents a share, on revenue of $165-$185 million.

Analysts on average were expecting earnings of 19 cents a share, on revenue of $197.4 million, according to Thomson Reuters I/B/E/S. [ID:nASA019PJ]

For September-November, net income was $8 million, or 12 cents a share, compared with $4.6 million or 7 cents a share, last year. Excluding items, Smart earned 27 cents a share.

Revenue almost doubled to $216.4 million.

The company, whose rivals include Netlist Inc (NLST.O), Sanmina-SCI (SANM.O) and Stec Inc STEC.O, said fewer business days in the second quarter would also put pressure on results.

Shares of Smart Modular were down 69 cents in extended trade, after closing at $6.37 on Thursday on Nasdaq. They have risen 6 percent since the company posted fourth-quarter results on Sep. 30. (Reporting by Siddharth Cavale in Bangalore; Editing by Vyas Mohan and Vinu Pilakkot)

FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article