Supply constraints hits SanDisk’s forecast, shares fall

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SanDisk Corp gave a current-quarter revenue forecast that was below Wall Street’s estimate, warning that it would be unable to the meet the booming demand for solid- drives and memory chips, and its shares fell 9 percent in extended trading.

The also second-quarter and revenue that barely beat analysts’ expectations, disappointing investors who have seen the blow past Wall Street’s forecasts for at least the past eight quarters.

That streak was threatened by the ’s third-quarter revenue forecast of $1.68 to $1.73 , which was short of analysts’ average estimate of $1.74 , according to Thomson Reuters I/B/E/S.

SanDisk’s growing focus on -end solid- drives, or SSDs, helped offset volatile for memory chips, powering the company’s stellar results and, since late March, its stock’s rise to life- levels.

However, the company’s increasing focus on cost control has dented its ability to expand capacity to keep with industry demand, said Betsy Van Hees, an analyst at Wedbush Securities.

“They find themselves in a in which they were a of years ago, when in the industry the -demand is balanced and they are constrained,” she said.

SanDisk’s cost cutting target would likely be around the middle to “somewhat” higher than the middle of its 15-25 percent forecast for the year, Financial Officer Judy Bruner said on a conference call.
The company is increasingly using its memory chips in the SSDs that it sells directly, but Bruner said gross margins on these embedded products were “somewhat below” the corporate average, which would dent gross margins going forward.

SanDisk said it continues to expect adjusted gross margins of 47-49 percent in the current quarter. Gross margins rose to 48 percent in the second quarter 47 percent a year earlier.

The company’s revenue SSDs comprised about 29 percent of the total revenue in the second quarter ended June 29, 16 percent a year earlier.

SanDisk, which counts Facebook Inc and Apple Inc among its customers, said total revenue rose 11 percent to $1.63 .

Net income rose 4.6 percent to $273.9 million, or $1.14 per share. Excluding one time items, SanDisk earned $1.41 per share.

Analysts had expected a of $1.39 per share on revenue of $1.60 , according to Thomson Reuters I/B/E/S.

Shares of the company closed at $107.83, after hitting a life- of $108.77 on Nasdaq on Wednesday. The stock fell to $97.68 in extended trading. (Reuters)[eap_ad_3]