February 3, 2009 / 12:25 AM / 11 years ago

SanDisk shares fall on outlook, equity offer

SAN FRANCISCO (Reuters) - Flash memory card maker SanDisk Corp SNDK.O warned that current-quarter revenue would fall far short of Wall Street’s expectations and said it may undertake an equity offering that could dilute shares by as much as 20 percent.

The news drove SanDisk shares down 16 percent in after-hours trading on Monday, after the stock had initially risen on the company’s report of higher-than-expected revenue in the fourth quarter.

SanDisk, the No. 1 supplier of flash memory-based data storage cards, forecast first-quarter revenue of $475 million to $575 million, missing by far the average analyst estimate of $621 million, according to Reuters Estimates.

Caris & Co analyst Betsy Van Hees called the revenue outlook “horrendous.”

“I think that the anticipation was that things were improving, and clearly by the guide things are not improving,” she said.

SanDisk also filed a shelf registration statement with the U.S. Securities and Exchange Commission and said it may pursue some form of equity financing this year as a “prudent insurance policy.”

Chief Financial Officer Judy Bruner said on a conference call that SanDisk has not made a final decision, but estimated an offering of $300 million to $500 million, which at current share prices would represent dilution of 12 to 20 percent.

Last year, SanDisk spurned an unsolicited buyout offer from Samsung Electronics Co Ltd (005930.KS) for $26 a share — more than twice its current share price — saying the offer undervalued the company. Samsung dropped its bid in October, citing SanDisk’s deepening losses and uncertain outlook.

Flash memory makers have been hurt by oversupply and falling demand for consumer electronics brought on by the global economic slowdown.


SanDisk forecast non-GAAP operating expenses of $750 million for 2009, achieved in part through a 12 percent employee headcount reduction in the fourth quarter, a freeze on salary increases and an elimination of bonus payments.

The company has 3,000 employees and had in December said it expected to cut 10 percent of its workforce.

SanDisk lowered its 2009 capital investment forecast to $500 million for 2009, from $1.6 billion invested in 2008.

“We believe that drastic industrywide capital expenditure cuts announced for 2009 will contribute to a better balance between supply and demand and an improved pricing environment in our markets later in 2009 and into 2010,” Chief Executive Eli Harari said in a statement.

In December, SanDisk announced a temporary production cut at its manufacturing facilities in Japan to deal with projected 2009 demand.

SanDisk’s net loss in the fourth quarter ended December 28 was $1.86 billion, or $8.25 a share, versus a net profit of $105.9 million, or 45 cents a share, in the year-ago period.

The latest results included a combined pretax goodwill and intangible asset impairment charge of $1.02 billion due to a decline in its market capitalization.

Excluding that and other items, SanDisk posted a loss of $1.65 a share. Analysts were expecting a loss of 60 cents a share, according to Reuters Estimates.

Revenue in the period tumbled 31 percent to $863.9 million, but was above Wall Street’s estimate of $766.8 million.

The company said its average price per megabyte sold in the fourth quarter fell 70 percent from a year earlier, or down 31 percent from the third quarter.

At the Consumer Electronics Show in January, SanDisk introduced a family of fast solid-state hard drives designed as drop-in replacements for hard disk drives in notebook computers [ID:nN08250468]. It also unveiled a portable music system based on memory cards preloaded with songs. [ID:nN07475098]

Shares of Milpitas, California-based SanDisk fell to $9.45 in extended trading from their regular session close of $11.28. The stock has fallen around 60 percent from a year ago.

(Reporting by Gabriel Madway; Editing by Tim Dobbyn, Richard Chang)

gabriel.madway@thomsonreuters.com; +1 415 677 2536

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