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Bloodied SanDisk preps for job cuts after market reading mis-steps

Taking ‘aggressive measures to regain excellence’. Better hurry

Analyst cuts to the chase

Analyst questions in the earnings call jumped right in to an underlying issue — with its share price depressed by these results is SanDisk an acquisition target? Mark Delaney of Goldman Sachs asked Mehrotra: “Do you think the NAND industry would benefit from consolidation?”

Mehrotra declined to speculate, offering views on high market growth, and saying: “Of course in 2015, as we have discussed, we have faltered some in our execution ... as we have been focused on growing and integrating our markets, integrating our various acquisitions. There have been some market shifts as well, but we remain very committed to continue to drive the growth opportunities ahead for our business.”

The reason SanDisk is being thought of as a potential acquisition target is that Mehrotra has run the business badly. It’s as simple as that.

Making a lot of acquisitions to enter the enterprise market over the past couple of years has paid off, but also brought problems in terms of having too many product architectures, firmware code bases, roadmaps etc, which have to be converged.

Looking ahead - comment

SanDisk expects second-quarter revenue to show an annual decline, partly due to the faster-than-anticipated ending of client SSD shipments to that large customer.

Enterprise SATA and SAS SSD revenues will also decline. Second-quarter revenue should be in the $1.15bn-$1.25bn area; it was $1.63bn a year ago. Will it be able to make a profit on this reduced revenue?

Third- and fourth-quarter revenues are also expected to show year-on-year declines, making for an all-in-all miserable 2015.

The screw-ups in product qualification, client SSD sales, and enterprise market mis-steps have been disastrous.

SanDisk is basically hoping to stabilise its business this year and return to growth in 2016, when its 48-layer 3D NAND product should help boost revenues.

If it doesn't succeed then even exec reporting line changes may not be enough. ®

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