April 17, 2008 / 8:57 PM / 9 years ago

SanDisk revenue beats estimates on gadget demand

<p>A variety of flash drives by Sandisk are displayed at the Consumer Electronics Show CES Unveiled event in Las Vegas, Nevada January 5, 2008.Rick Wilking</p>

SAN FRANCISCO (Reuters) - SanDisk Corp SNDK.O, the world's top maker of data-storage memory chips, issued a strong sales forecast on Thursday and said it expected memory price declines to moderate in the current quarter.

Shares of SanDisk, down about 22 percent this year, rose 4.2 percent on the news, which came after the company reported higher-than-expected first-quarter revenue, citing strong demand for memory chips used in consumer gadgets.

SanDisk said sales were helped by its international business, by demand for its Sansa music players, and by mobile-phone and satellite-navigation device buyers.

But its average price per megabyte sold fell 61 percent from the year-ago quarter, and 29 percent from the fourth quarter, as competitors liquidated inventories "at prices that were at or below cost," said SanDisk CEO Eli Harari.

Harari said the company planned to expand in markets that are less vulnerable to sharp price declines, such as corporate data storage, where he said premiums could be significant.

"Conditions should improve gradually as the low-price inventory is sold through the channels," he told analysts on a conference call.

Harari said SanDisk expects price declines to moderate in the current quarter, but cautioned that product profit margins would remain under pressure as lower-cost chips would not be released until the second half.

SanDisk said the average capacity of its retail flash memory cards increased 71 percent from a year earlier and 16 percent from the fourth quarter.

"It was encouraging that we saw a good density increase, and the fact that we saw pricing rebounding was also an encouraging sign," said American Technology Research analyst Doug Freedman, who has a "buy" rating on SanDisk.

First-quarter net income was $17.9 million, or 8 cents per share, compared with a net loss of $575,000 a year earlier when SanDisk had more than $20 million in acquisition-related costs.

Revenue rose 8 percent to $850 million, exceeding analysts' average forecast of $812.2 million, according to Reuters Estimates. In January, SanDisk had projected first-quarter revenue of $775 million to $875 million.

Excluding acquisition-related expenses and other items, SanDisk earned 21 cents per share, less than average projection of 27 cents per share, according to Reuters Estimates.

The company forecast second quarter revenue in a range of $875 million to $950 million. The midpoint of the range, $912.5 million, was higher than the average Wall Street forecast of $903.5 million, according to Reuters Estimates.

SanDisk shares rose to $27.00 in extended trading following the results, compared to their close of $25.90 on Nasdaq.

Editing by Braden Reddall, Ted Kerr, Phil Berlowitz

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