SanDisk sees loss after decline in sales

SanDisk reported that its quarterly results swung sharply to a loss amid an unexpected decline in sales and it warned worse was in store as it further slashes memory chip prices in this quarter.

Chief financial officer Judy Bruner warned investors to expect a sharp drop in third-quarter revenue as SanDisk moves aggressively to cut prices of memory chip products to reduce a nine-week supply of inventory - two weeks more than normal.

"We are forecasting third-quarter total revenue between $750 million and $850 million," Bruner told investors on a conference call following its second-quarter report on Monday.

That's far below the range of $964 million (£482 million) to $1.24 billion expected by analysts, according to Reuters Estimates. SanDisk had revenue in the third quarter of 2007 of $1.04 billion.

While bad news for SanDisk and its investors, steep price declines for memory chips translate into rapid price drops for all manner of hot consumer gadgets for which flash memory chips are a key component.

Bruner said price declines for SanDisk will be more aggressive in the second half of this year than they had been in the second quarter, when average prices per unit of memory declined 55 per cent from a year ago.

She warned it was likely to take several quarters to reduce inventories amid an industry-wide glut of capacity. She said inventories could still be above current levels at year-end.

SanDisk said it was delaying the next phase of expansion at the Fab 4 production plant it operates with Toshiba in Japan until April 2009.

The company said it was pushing out its decision to invest in its Fab 5 plant until industry conditions improve, as it seeks to protect its balance sheet.

In a statement, chairman and chief executive Eli Harari blamed the disappointing second-quarter results on "the rapid deterioration in consumer confidence," which hurt sales to US retail customers and mobile handset makers.

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