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SanDisk Corporation : SanDisk Earnings Fall As Inventory Grows And Prices Fall

04/19/2012 | 06:57pm US/Eastern

--SanDisk sees Q2 Revenue of $950M to $1.05B

--Says second half of 2012 should improve with more smartphone releases

--Soft numbers contrast with smartphone makers Apple and Samsung

(Incorporates updates throughout.)

   By Ian Sherr and Shara Tibken 

SanDisk Corp.'s (SNDK) first-quarter earnings fell 49% as inventory grew and prices declined more than expected.

The Milpitas, Calif. chip maker, once mainly known for small storage cards and thumb drives, has also built a big business selling flash memory chips used in such devices as well as smartphones, tablets and digital music players.

SanDisk also recently made an acquisition to give it a bigger foothold in solid-state drives, flash-based storage devices that are being used in greater numbers in data centers and personal computers.

The softness at SanDisk contrasts with bullish results from some smartphone makers, such as Apple Inc. (AAPL) and Samsung Electronics Co. (SSNHY, 005930.SE). But it echoes weakness seen at other handset makers like Research in Motion Ltd. (RIMM, RIM.T) and Nokia Corp. (NOK).

SanDisk has now posted weaker earnings for five quarters running, amid lower licensing revenue, softer margins and one-time charges, among other issues. Earlier this month, SanDisk reduced its first-quarter revenue expectations due to weaker-than-expected pricing and demand.

The company forecast second-quarter revenue between $950 million and $1.05 billion, saying additional pricing and demand challenges would persist. Analysts on average had been expecting revenue of nearly $1.3 billion, according to a survey by Thomson Reuters.

SanDisk said sales should pick up in the second half of the year, as a bevy of new mobile devices hit the market ahead of the back-to-school and holiday shopping seasons.

"We believe that smartphones, tablets, ultrabooks and solid-state drives along with stronger seasonality should lead to an improved demand environment," Sanjay Mehrotra, SanDisk's chief executive, said on a conference call with analysts.

But, SanDisk said, its full-year revenue will be below what it tallied at the end of last year.

SanDisk reported a first-quarter profit of $114.4 million, or 46 cents a share, down from $224.1 million, or 92 cents a share, a year earlier. Excluding stock-based compensation costs, income tax adjustments and other one-time items, per-share earnings fell to 63 cents from $1.03. Analysts polled by Thomson Reuters were expecting 69 cents.

Total revenue fell 6.9% to $1.21 billion. The company a few weeks ago forecast $1.2 billion, down from an already downbeat view.

Gross margin narrowed to 34.5% from 42.6%. Input costs rose 6.3%.

Shares closed at $40.47 and were down more than 10% in after-hours trading. The stock is down 18% so far this year through Thursday's close.

-By Ian Sherr and Shara Tibken, Dow Jones Newswires; 415-439-6455;

--Ben Fox Rubin contributed to this article.

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