SAN FRANCISCO (Reuters) - SanDisk Corp SNDK.O, the world’s largest maker of data-storage memory chips, on Monday gave a revenue forecast that badly lagged expectations and its shares fell more than 5 percent.
The stock had initially risen in after-hours trade when SanDisk posted a better-than-expected quarterly profit, but it fell sharply on SanDisk’s ‘cautious’ outlook.
SanDisk expects revenue for its current first quarter of $775 million to $875 million, Chief Financial Officer Judy Bruner said on a conference call to discuss quarterly results. Analysts had expected revenue of $991.6 million, according to Reuters Estimates.
“As we enter 2008, there are similarities to early 2007 in terms of the supply-demand balance and the impact this has on pricing and at the same time the macroeconomic environment is uncertain,” Bruner said. “As a result, we are cautious in our outlook.”
SanDisk executives said on the call that they saw U.S. consumer demand slow in the holiday-sales-fueled fourth quarter, echoing comments made by other tech companies, including chipmaker Cypress Semiconductor CY.N.
“There definitely is a little bit of weakness in the retail channel that’s showing up with them,” said American Technology Research analyst Doug Freedman.
Even so, Chief Executive Eli Harari said in a statement the company expects to grow revenue and profits in 2008 despite “current uncertainties in the worldwide economy and a challenging industry pricing environment in the first quarter.”
SanDisk’s fourth-quarter net income was $105.8 million, or 45 cents per share, compared with a net loss of $35.1 million, or 17 cents per share, in the year-ago period, when it took charges related to its purchase of Msystems Ltd.
Revenue rose 7 percent to $1.25 billion from $1.16 billion. The company cited strong growth in its mobile business for the advance in revenue and profit.
Excluding the impact of acquisition-related charges, stock-based compensation expense and the related tax effect, SanDisk had a fourth-quarter profit of 69 cents per share.
The Milpitas, California-based company was expected to have a profit before items of 62 cents per share, on average, on revenue of $1.26 billion, according to Reuters Estimates.
Product revenue in the quarter was a record $1.12 billion, up 4 percent on the year-ago period and 22 percent on the previous quarter. License and royalty revenue rose 51 percent from a year ago to $128 million.
For all of 2008, Bruner said she expects SanDisk’s revenue to rise 15 percent to 25 percent, implying revenue of $4.48 billion to $4.87 billion.
“This assumes continued softness in consumer demand but continued progress in growing our international market share and continued momentum in the mobile market,” Bruner said.
For 2008, analysts expect a per-share profit of $2.28 before items on revenue of $4.82 billion. In 2007, the company had a per-share profit before items of $1.73 on revenue of $3.90 billion.
Analyst Freedman also said that despite the soft revenue forecast for the current quarter, he noted that the company’s gross margin forecast is “actually pretty impressive.”
Bruner said on the call that she expects the company’s product gross margin in 2008 to be 24 percent to 28 percent, compared to 24 percent in 2007.
SanDisk shares fell 5.2 percent in after-hours trade to $24.54 from a regular Nasdaq close of $25.89. So far this year, shares of the company have fallen 28 percent so far this year amid a global stock market sell-off spurred by concerns that the United States might be in a recession.
Reporting by Duncan Martell; Editing by Braden Reddall, Gary Hill