Summary: Poor CC voice quality , Sanjay sounded depressed , analysts were stunned by the poor Q2 guidance
2Q revenue $~1B 17% down q/q ; reducing sales into the low margin white label channel, expected reduced sales from mobile embedded, expecting over supply and margin pressure. Gross margin is expected to drop from 36% to 28%.
Main problems:
1) OEM bundling less cards/lower capacity; this is a major sale channel.
big problem:Trend is unlikely to reverse.
2) Embedded is moving from pure NAND to MCP (NAND+DRAM)
SanDisk was slow to respond, but new embedded is expected to be qualified in Q2 including MCP, probably with Elpida DRAM (which raises a lot of other questions); expecting strong ramp in 2H.
Relatively good:
SanDisk Still expects strong 2H, but now from a poor 1H.
Delay of FAB5 ramp to next year.
Stated will to keep the stock count stable from last year average of 245M diluted; in Q1 we had $247M; my guess is that SanDisk will use most of the buyback in Q2.
Good:
SSD: solid growth Q/Q; stable pricing on OEM channel.
Reducing OPEX by $75M; reducing CAPEX
Overall, SanDisk guided for shockingly poor Q2 revenue and margins. Actually, so low that it’s unlikely that they will miss, no matter what. Pretty amazing that by mid-Q1 everything seems fine. Expecting many downgrades tomorrow.
This is probably the low point of the year. They will end the year with higher cash balance than today and with better supply-demand and SSD position. But to be honest this industry sucks. Even the management doesn’t know what will happen in 1-2 months and this is with industry of just 4 players.
|
