Strength in the NAND flash memory chip market, and from Apple’s iPhone in particular, should help SanDisk beat expectations when it reports Q2 earnings when it reports tomorrow, according to a note today from Stifel Nicolaus analyst Patrick Ho.
SanDisk shares are coming under pressure this morning after Needham analyst Y. Edwin Mok cut his rating on the stock to Under Perform from Hold.
Mok writes in a research note that the downgrade reflects “early signs of weakness in the NAND flash memory sector that we believe will lead to lower prices.”
Good chip company, bad chip company: While SanDisk shares plummet 14 percent following a much-worse-than-expected Q1 outlook, Atheros Communications is up nearly five percent in after-hours trading at $12.68.
During a conference call with analysts following a better-than-expected fourth-quarter report, wireless chip maker Atheros forecast Q1 sales to fall 12 to 18 percent, which would be a range of $80.61 million to $86.5 million.
Toshiba is suspending flash memory production at two of its plants, but only for nine days. The company denies plans to shut down the plants completely, though it plans to speed up restructuring at its money-losing chip operations.
In October, Samsung withdrew a bid to acquire SanDisk. Some speculated that Toshiba would swoop in and rescue the company, but it didn’t happen. Today, SanDisk shares rallied due to the same rumors about Toshiba–analysts noted that Toshiba could no more afford the acquisition now than it could in in the fall.
SanDisk’ s stock is “too attractive to ignore,” says Goldman Sachs chip analyst James Covello. Since Samsung pulled its $26-a-share takeover, Covello estimates that the company’s IP is worth $6-$7 a share–which is still a compelling valuation, even with an overall bearish outlook. No surprise, then, that shares have gotten a boost today.
After six months of negotiation, Samsung has withdrawn its bid to acquire SanDisk at $26 a share. Samsung CEO Yoon Woon Lee expressed his “disappointment” and cited multiple reasons why the deal wouldn’t work–including a surprise announcement by SanDisk of a quarter-billion dollar operating loss. SanDisk, for its part, replied that it never got a reply to a letter rejecting Samsung’s bid as too low at $26 a share. All sound familiar?
In case you happen to think that Toshiba is going to outbid Samsung for SanDisk (SNDK), you ought to take note of the company’s currently grim view of the NAND flash memory market.
In fact, as Bloomberg reports, Toshiba today cut its full-year net income forecast for the March 31, 2009, fiscal year by 46 percent to 70 billion yen, which would be a four-year low.
Samsung Electronics Corp. and SanDisk Corp. can both learn some useful lessons from other recent takeover battles in the technology sector, particularly the failed merger talks between Microsoft Corp. and Yahoo Inc.
Defying skeptics who had warned that a deal would face significant hurdles, Samsung this afternoon announced that it has offered to buy SanDisk for $26 a share in cash.
While SanDisk (SNDK) shares continue to trade sharply higher after Samsung said it is considering making a bid for the company, some analysts are cautioning that the notion of merging the two companies is far from a sure thing, and would involve substantial complications.
Shares of flash memory chipmaker SanDisk (SNDK) are falling $1.89, almost 11 percent, to $15.75 this afternoon following a note by Citigroup analyst Craig Ellis today that says 2009 earnings estimates are in jeopardy for the company because contract prices for flash are plummeting.
For the memory sector, it is a day to forget.
Last night, SanDisk (SNDK) reported extremely nasty June quarter earnings–the Street has responded with a host of downgrades. Meanwhile, this morning, Citigroup chip analyst Glen Yeung cut his ratings on Micron (MU), Qimonda (QI) and Spansion (SPSN) to Hold from Buy.
SanDisk (SNDK) reported a very ugly second quarter, posting revenue of $816 million and a pro forma loss of 10 cents a share, well short of the Street consensus of $906.8 million and a profit of 13 cents.
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