Shares of memory chip maker SanDisk Corp. edged lower Thursday after a Deutsche Bank analyst said the company's cost-cutting may not be enough to offset falling demand.
The stock dipped 31 cents, or 3.2 percent, to $9.48 in afternoon trading.
The analyst, Bob Gujavarty, told investors in a note that SanDisk's plans to reduce 2009 capital expenditures to below $900 million from a previous projection of $1.3 billion may still leave excess inventory.
"The cuts come relatively late in the cycle and may not offset softening demand," Gujavarty said. He added that he expects high inventory levels through the first half of 2009. Gujavarty reiterated a "Hold" rating on shares and lowered his price target to $12 from $15.
SanDisk's cost-cutting comes in response to falling prices for NAND memory chips, which are used in consumer electronics such as music players and digital cameras. The Milpitas, Calif.-based company said Tuesday that it will halt production for two weeks of some types of flash memory wafers that it makes in a joint venture with Toshiba Corp. in Yokkaichi, Japan.
Gujavarty said the average sale price for NAND chips seems to be stabilizing, with the average price down about 13 percent from the previous quarter, less severe than the roughly 15 percent decline he estimates for the previous period.
But he said, "We suspect unit growth will disappoint due to slower retail sales of mobile phones and digital still cameras, the principle markets for removable flash cards."
