SanDisk Corp. said Monday that hefty charges to write down the value of assets and inventory amid industrywide price reductions forced the world's largest supplier of flash memory cards to post a larger-than-expected fourth-quarter loss.
The company also warned it expects 2009 to be another "very challenging" year, in which it may seek to raise cash through a dilutive stock sale.
Shares closed down 15 cents at $11.28, but tumbled $1.83, or 16.2 percent, to $9.45 in aftermarket electronic trading following the quarterly report. The global economic recession has caused many companies and consumers to pull back sharply on technology spending, hurting data storage companies across the industry.
Quarterly losses totaled $1.86 billion, or $8.25 per share, compared with year-ago profit of $105.8 million, or 45 cents per share. The latest period was hurt by $1.91 billion worth of charges for asset write-downs as a result of the sustained drop in SanDisk's market capitalization, inventory-related charges and idle capacity costs, and other items.
Adjusted losses totaled $1.65 per share, compared with year-ago profit excluding items of 69 cents per share. Analysts surveyed by Thomson Reuters had expected a much smaller loss of 60 cents per share, excluding items.
Total revenue slid 31 percent to $863.9 million as product revenue dropped 34 percent to $742 million and license and royalty revenue fell 5 percent to $122 million. However, the results beat Wall Street's forecast for sales of $766.7 million.
For fiscal 2008, losses totaled $2.07 billion, or $9.19 per share, compared with 2007 profit of $219 million, or 93 cents per share. Revenue fell 14 percent to $3.35 billion from $3.90 billion.
Looking ahead, Chairman and Chief Executive Eli Harari said he thinks the drastic industrywide capital expenditure cuts announced for 2009 will help balance supply and demand and improve pricing later in 2009 and into 2010.
But in a conference call with analysts, executives warned that the company is expecting a "subdued" retail environment in the first quarter and continued weak OEM demand. SanDisk is forecasting first-quarter sales of $475 million to $575 million, far below Wall Street's average estimate of $631.7 million.
SanDisk will continue to lower its 2009 capital investment plans, estimating total spending of $500 million for the year, down from $1.6 billion invested in 2008. The company also said it's likely that inventory could still go up in the first quarter.
Furthermore, SanDisk filed a shelf registration statement with the Securities and Exchange Commission in order to be able to launch an equity offering this year. On the conference call, Judy Bruner, SanDisk's chief financial officer, noted that the company hasn't made any final decisions, but said a stock offering could range between $300 million to $500 million. That would dilute current shareholders' stakes by 12 to 20 percent.
SanDisk shares, which peaked at $33.17 in May, plunged to $5.07 in November amid the global market meltdown and have slowly been regaining ground.
South Korea's Samsung Electronics Co., the world's largest manufacturer of NAND flash memory chips used in digital devices such as cameras and music players, had offered last year to buy SanDisk for $26 a share bid, but was rejected. In October, after six months of negotiations and amid a sharp decline in SanDisk's stock price, Samsung withdrew its bid. SanDisk in January reached a deal to restructure its joint venture with Toshiba Corp., shifting more than 20 percent of the operation's capacity to Toshiba in an effort to cut capital spending.
