Huge Day for Lexar Media
Updated from 4:52 p.m. EST
Stronger earnings guidance kept
Lexar Media
(LEXR)
aloft late Thursday after the company's shares doubled in regular trading on a stunning legal triumph over Toshiba.
Lexar shares recently changed hands on Instinet for $6.44 apiece, up 12 cents from their 4 p.m. close. In regular trading, the stock added $3.15, or 99%, as traders celebrated a jury's $380 million damages award to the company in a trade-secrets lawsuit over flash memory technology.
While saying only that it was "encouraged" by the verdict in its after-the-bell earnings release, Lexar did unveil some organizational changes it said were designed to "emphasize profitability." It named a new vice president of worldwide operations and an executive to oversee Europe, the Middle East and Asia.
"While we do not believe it is prudent to give full year guidance due to the rapidly changing market conditions, we are providing an outlook for the first quarter," Lexar said. The company put quarterly revenue at $200 million and its loss of 2 cents to 6 cents a share, excluding litigation spending.
Analysts had expected the company to lose 22 cents a share on revenue of $199.1 million.
Wednesday night's verdict could mark a significant shift in the flash-memory market because Lexar plans to seek an injunction barring Toshiba from selling products that incorporate the technology, known as "NAND," in the U.S. The company expects the first hearing on that request to occur next month.
Earlier Thursday, the jury was scheduled to begin hearing evidence and arguments in the punitive-damages leg of the trial. According to Lexar, the jury found Toshiba's actions in stealing the trade secrets, which it then allegedly shared with
SanDisk
(SNDK)
, were "oppressive, fraudulent or malicious."
CIBC upgraded the shares Thursday to outperform from underperform, saying a realistic estimate of punitive damages is $1 billion, or more than $12 a Lexar share.
Flash memory is used in cell-phones and other devices as a means to save electronic data in the absence of an active power supply. Lexar is pursuing a separate patent-infringement complaint against Toshiba in federal court.
In its just-completed fourth quarter, Lexar swung to a loss as a change in accounting method cut into revenue and profit. The maker of digital photography memory products lost $63.3 million, or 80 cents a share, in its latest quarter, compared with net income of $18.9 million, or 21 cents a share, a year earlier.
The results reflect Lexar's previously announced decision to record revenue from all retail customers on a sell-through basis rather than from certain retail customers on a sell-to basis. This reduced revenue by about $64 million and a reduction in gross profit of about $9 million during the fourth quarter.
Revenue rose 6% to $188.5 million from $177.5 million in the same period last year.
Analysts had expected the company to lose 73 cents a share on revenue of $187.9 million.
Eric Stang, chairman, CEO and president, said, "Our fourth-quarter results were negatively impacted by the challenging market dynamics at retail during the period, which resulted in greater than anticipated price reductions, promotional activities and price protection obligations, as well as writedowns to our inventory and higher-than-anticipated operating expenses."
Stang said the company was not satisfied the results and would take "strong measures" to improve its competitive ability, including reducing costs in both manufacturing and operating expenses.