SanDisk cuts jobs to counter falling prices
SAN FRANCISCO (Reuters) - SanDisk Corp. (SNDK.O) said on Friday it will cut 10 percent of its work force and trim executive salaries to compensate for a recent collapse in prices for memory chips, sending its shares down 5 percent.
It was the second recent warning about over-supply in the volatile memory chip industry. Micron Technology Inc. (MU.N) said last week that prices for memory chips used in consumer electronics would drop 30 percent to 40 percent this quarter.
SanDisk, which competes with Micron's Lexar division in making flash memory chips for devices like digital cameras and media players, said it expected to cut prices on many products by 30 percent to 40 percent in order to keep market share.
"Although we believe there will be strong pickup in demand for our products in the second half of the year, we do not have visibility as to when the current aggressive pricing cycle will run its full course," Chief Executive Eli Harari said in a statement.
SanDisk said industry-wide prices for NAND flash memory chips had fallen about 50 percent over the past two months due to excess supply and seasonally weak demand in the first part of the year.
Fears of an impending NAND memory glut have sent shares in its manufacturers sliding. Over the past month, Micron's stock has fallen 11.5 percent while SanDisk is down 9.6 percent.
Other top memory chip manufacturers include Samsung Electronics Co. Ltd. (005930.KS) and Hynix Semiconductor Inc. (000660.KS), both of South Korea, and Toshiba Corp. (6502.T) and Elpida Memory Inc. (6665.T) of Japan.
"We believe that lower price points in the NAND industry will accelerate demand, particularly in the handset market, and will stimulate the emergence of new markets, fueling continued growth," Harari said.
The Milpitas, California-based company said it would cut about 250 jobs globally, trim executive pay by 10 percent to 20 percent, and freeze salaries for all other employees.
The moves would save SanDisk between $30 million and $35 million a year, plus another $10 million in stock compensation expenses, the company said.
SanDisk added that it would book restructuring charges of $15 million to $20 million, with most of that recorded in the first quarter.
SanDisk stock fell 4.8 percent to $38.20 in extended trading after the moves were announced.
