ULLtraDIMM dam plus inventory oops smacks SanDisk’s Q4 growth

Problems in the supply chain

Judy Bruner, SanDisk's CFO, said: “Our Enterprise SSD revenue grew strongly, while our client SSD revenue was down modestly primarily due to seasonality and anticipated supply constraints”

There was also “unplanned maintenance activities in our Yokkaichi fab operations, as well as lower yield on certain memory die, which led to unexpected reductions in production output," Mehrotra said.

The effects were felt “most notably in our retail and (embedded) iNAND product lines. Within retail, the late timing of supply availability resulted in lost sales opportunities. Within iNAND, demand for our previous generation products fell more rapidly than forecast by our customers, while we had limited ability to service demand for our newer products due to supply constraints".

Natch SanDisk is working to fix things: “One of our top operational priorities for 2015 is to rebuild our inventory levels, which we expect to be restored to normal levels by mid-year.”

According to Bruner, "We exited 2014 at about eight weeks of inventory ... I have said in the past that we need to be at least to 10 weeks. In fact the right range I believe is 10 to 12 weeks."

So why did the SanDiskers shrink their inventory? Were they trying to run too lean a supply chain?

At least the enterprise flash business did well, as "turning to enterprise SSDs, revenue grew on both a sequential and a year-over-year basis during the fourth quarter ... and we ... expect that our enterprise solutions revenue will achieve $1bn in 2015", said Mehrotra.

Client SSDs also did well, up to a point, as along came another problem, with the company reporting that a "major customer has decided to move away from our client SSD solution starting in Q1".

“Our retail revenue was down two per cent sequentially and down 18 per cent year-over-year," said Bruner, and "our Enterprise SSD revenue grew strongly, while our Client SSD revenue was down modestly primarily due to seasonality and anticipated supply constraints".

This will affect client SSD sales throughout 2015 but Mehrotra said “we anticipate that our client SSD revenue will grow again starting in 2016".