Alexei Oreskovic
SanDisk(SNDK Quote - Cramer on SNDK - Stock Picks) shares plunged 24% to their lowest level in five years, a day after surprising the Street with a second-quarter loss and an ugly forecast.
In its quarterly earnings report Monday, SanDisk also announced plans to delay investments in new chip factories to combat the oversupply of flash chips that has pressured prices. While the market for NAND flash chips has been in the dumps for more than a year, SanDisk's report of deteriorating business conditions made the Street even more negative on the sector. Citigroup analyst Glen Yeung downgraded SanDisk to a sell rating on Tuesday. "We are throwing in the towel on SDNK shares for 2008, expecting industry fundamentals to get decidedly worse by late 2008 before potential improvements in mid 2009," Yeung wrote in a note to investors. What's more, Yeung said, he increasingly suspects that "saturation has started to negatively impact product growth rates for USB drives and MP3 player products, suggesting a demand side bail-out may prove less probable than the Street or SNDK might hope." The Milpitas, Calif., maker of flash memory chips said sales in the three months ended June 29 totaled $816 million -- significantly below the average analyst expectation of $906 million. At this time last year, SanDisk had revenue of $827 million. "Our second-quarter sales were well below our expectations due to the rapid deterioration in consumer confidence which impacted our sales in U.S. retail and to handset OEMs," said CEO Eli Harari in a statement.
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