Feeds

Toshiba plays sugar daddy to SanDisk

Fab financial footwork for flash

Build a business case: developing custom apps

SanDisk is getting almost $300m cash and freeing itself from over half a bilion dollars of equipment lease obligations courtesy of sugar daddy Toshiba.

The two have signed a definitive agreement concerning their flash fabrication joint-venture, following on from a non-binding memorandum of understanding signed in October last year. They each have a half share in this JV, which manufactures flash chips in three fabrication plants. The MoU talked about 30 per cent of the JV transferring to Toshiba via a cash payment to SanDisk and Toshiba taking on equipment lease obligations for plants known as Fab 3 and Fab 4.

The total value at that point for SanDisk was about $1bn. It was fighting off a hostile takeover bid from Samsung at that time, and it was supposed SanDisk needed to strengthen its balance sheet.

The definitive agreement still applies to the restructuring of the Fab 3 and Fab 4 area of the JV but reduces the transferred lease obligation percentage to 'more than 20 per cent', meaning less than 30 per cent. The total worth to SanDisk is 80bn yen ($890m) of which about a third is a cash payment and the rest the reduced lease obligations.

SanDisk and Toshiba will remain equal partners for the JV's remaining capacity and SanDisk has the option to buy back part of the transferred capacity on a foundry basis. It also retains an option to keep investing up to 50 per cent in future Fab 4 expansions and in Fabs 3 and 4 technology transitions. Finally both SanDisk and Toshiba will continue joint technology development in future NAND products and 3D read/write memory.

So, if SanDisk starts to make money again, it can hopefully pay back Toshiba and return to a more equal footing. For now, like a house-owner desperate for cash, it's released some equity in return for cash and reduced mortgage payments. It's nice of Toshiba to oblige, considering that it is facing a world of financial hurt after a tremendously bad final quarter of 2008. It is forecasting a net loss for its current financial year, ending March 31, of 280 billion yen ($3.1bn). In September last year it thought it would make 70 billion yen (c$780m) profit, showing the damage the last quarter inflicted.

It is laying off up to 4,500 temporary workers, cutting spending, reducing output from existing factories and putting off the building of new ones. Reuters is reporting Toshiba is talking to NEC about the merger of some of their chip operations too. Then there is the small matter (not) of buying Fujitsu's hard disk drive operations. In the circumstances, acting as an 80 billion yen bailer-outer to SanDisk seems positively heroic. ®

Build a business case: developing custom apps

More from The Register

next story
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Amazon says Hachette should lower ebook prices, pay authors more
Oh yeah ... and a 30% cut for Amazon to seal the deal
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Nintend-OH NO! Sorry, Mario – your profits are in another castle
Red-hatted mascot, red-colored logo, red-stained finance books
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
Chips are down at Broadcom: Thousands of workers laid off
Cellphone baseband device biz shuttered
Feel free to BONK on the TUBE, says Transport for London
Plus: Almost NOBODY uses pay-by-bonk on buses - Visa
Twitch rich as Google flicks $1bn hitch switch, claims snitch
Gameplay streaming biz and search king refuse to deny fresh gobble rumors
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Maximize storage efficiency across the enterprise
The HP StoreOnce backup solution offers highly flexible, centrally managed, and highly efficient data protection for any enterprise.