Mon, Feb 19, 2007 - Page 6 News List

Declining product prices bring job cuts at SanDisk

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SanDisk Corp, the world's largest maker of flash-memory cards, plans to fire as many as 250 people, or 10 percent of its workforce, because of falling prices for its products. Shares dropped in extended trading on Friday.

The remaining employees will have their salaries frozen, the California company said on Friday in a statement. The company also plans to trim pay for all executives, including a 20 percent cut in chief executive officer Eli Harari's salary.

The flash-memory industry is suffering from a product glut because output from new factories exceeded customers' demand. SanDisk will lower product prices 30 percent to 40 percent below fourth-quarter levels to maintain market share, Hariri said in the statement.

"Although we believe there will be strong pickup in demand for our products in the second half of the year, we do not have visibility as to when the current aggressive pricing cycle will run its full course," Hariri said.

The firm's shares fell US$1.87, or 4.7 percent, to US$38.26 in extended trading on Friday after the announcement. They fell US$1.02, or 2.5 percent, to close at US$40.13 in NASDAQ trading. The shares have dropped 6.3 percent since Jan. 30, when the firm reported its first loss in almost five years.

"That's obviously bad," said Eric Ross, an analyst for ThinkEquity Partners in New York, who rates the shares "accumulate" and said he doesn't own them.

"Investors knew this was happening. SanDisk is now admitting it," he said.

Ross said analysts will lower their first-quarter revenue estimates for the company. The average estimate of 18 analysts is currently US$848.7 million, according to a Bloomberg survey.

The average selling prices of Nand-type flash memory chips has fallen 50 percent in the past two months, Harari said.

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