Spansion Gets Slugged - TheStreet

Spansion Gets Slugged

The stock plunges after earnings fall well short of expectations.
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Updated from 4:57 p.m. EDT

Spansion

(SPSN)

shares plummeted late Wednesday after the flash memory chipmaker reported a quarterly loss that was more than twice as large as expected.

And while the company said it would undertake large-scale cost-cutting to eliminate up to $100 million in expenses this year, it did not provide financial guidance for the current quarter because of what it labeled an "intensely competitive price environment."

The Sunnyvale, Calif., company said it lost $75.4 million, or 56 cents a share, in the three months ended April 1. Analysts polled by Thomson Financial were looking for only a 24-cent loss.

At this time last year, Spansion lost $51.9 million, or 40 cents a share.

Sales in the first quarter were $628 million, short of the $678.2 million expected by analysts.

"I believe Spansion gained share within a difficult pricing environment while accelerating the acceptance of new, more cost-effective technologies by its key customers," said CEO Bertrand Cambou in a statement.

"Looking forward, we are intensifying our cost reduction efforts, including our aggressive manufacturing ramp to advanced technologies," Cambou said.

Shares of Spansion plunged $2.31, or 18.5%, to $10.18 in recent after-hours trading.

A former joint venture of

Advanced Micro Devices

(AMD) - Get Report

and

Fujitsu

, Spansion makes NOR flash memory chips, a component in cell phones and other electronic gadgets.

Prices for NOR flash, as well as its cousin NAND flash, have been under severe pressure in recent months.

Intel

(INTC) - Get Report

, which makes both NOR and NAND flash chips, said Tuesday that its flash business had an operating loss of $283 million in the first quarter, as sales declined 18% year over year.

Spansion said it expects pricing pressure to moderate in the current quarter, on the basis of historical trends.

The company added that it expects its total bit shipments to increase in the second quarter based on its plan to double shipments of chips manufactured with 90-nanometer circuits. By shrinking the size of the circuits on flash chips, Spansion is able to reduce its cost per bit.

Spansion also said it would sell certain nonperforming assets and consolidate certain functional operations in order to save between $50 million and $100 million in planned expenses for 2007.