) first quarter 2012 adjusted earnings of 58 cents per share missed
the Zacks Consensus Estimate by 3 cents. The adjusted or non-GAAP
earnings per share exclude amortization of acquisition-related
intangible assets, convertible debt interest and tax gains, but
include stock-based compensation expense.
Following the earnings release, the company's shares plunged
13.76% in after-market trade as the earnings dropped a significant
41.1% from the year-ago level. The weakness was mainly due to lower
demand for its mobile cards at some OEMs (original equipment
manufacturers) and weak pricing.
Total revenue for the first quarter was $1.21 billion, down 6.8%
on a year-over-year basis. The quarter's result was roughly in line
with the company's expectation of $1.20 billion and the Zacks
Consensus Estimate of $1.24 billion. The revenue deceleration was
due to weak performances in both Retail and OEM verticals.
Segment wise, Product revenue decreased 8.6% year over year to
$1.47 billion, while License and Royalty revenue came in at $99.1
million, up 18.1% year over year.
Reported gross margin in the quarter was 34.5%, down 810 basis
points (bps) from the year-ago quarter. The margin decline was due
to higher cost as well as price declines.
Operating margin was 15.9% versus 27.0% in the year-ago quarter.
The company's total operating expenses increased 11.0% on a
year-over-year basis. Higher operating expenses were mainly due to
a 17.9% year-over-year increase in research and development
(R&D) costs, partially offset by lower general and
Net income on a GAAP basis was $114.4 million or 46 cents per
diluted share compared with $224.1 million or 92 cents in the
Excluding the amortization of acquisition-related intangible
assets, convertible debt interest expense and related tax
adjustments, but including stock-based compensation expense,
non-GAAP net income for the first quarter was $142.2 million or 58
cents per diluted share compared with $241.6 million or 99 cents,
in the year-ago quarter.
Balance Sheet & Cash Flow
SanDisk generated $209.6 million in cash from operating
activities, compared with $67.2 million in the prior quarter.
Capital expenditure was $144.2 million. Cash and short-term
investments were $2.67 billion versus $2.85 billion in the previous
quarter. Long-term marketable securities were $2.8 billion.
Convertible long-term debt for the quarter was $1.63 billion, up
from $1.60 billion in the previous quarter.
Management believes that price declines will continue in the
second quarter, but also stated that scenario could improve in the
second half of fiscal 2012. Management also expects higher demand
for its mobile and SSD solutions, which will likely boost its
revenue growth in the third and fourth quarters.
SanDisk posted a weak first quarter with both the top and bottom
lines missing the Zacks Consensus Estimates. Both OEM and retail
sides of the business showed weakness. Second quarter guidance was
feeble, citing some demand uncertainty from smartphone makers as
well as continued price declines.
Though near-term visibility, memory price declines, lackluster
PC sales, European issues and currency fluctuations are headwinds,
we remain positive on the management's commentary reflecting a
turnaround story in the second half of the year and vibrant secular
demand for NAND flash.
Currently, SanDisk holds a Zacks #4 Rank, implying a short-term
SANDISK CORP (
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