The price war between the memory makers of the world
really is over.
SanDisk (Nasdaq: SNDK) put the final John
Hancock on the
peace accordwhen it did one better than
Micron Technology (NYSE: MU) -- not only did
pricing stabilize, but SanDisk actually made a
profit!
That was unthinkable last year, and still a distant dream
for most memory chip makers as recently as last quarter, when
SanDisk eked out a slim profit. But SanDisk did no eking this
quarter, pulling out a hefty $231 million profit on $935
million in sales, which is up from a $166 million loss on
$821 million in revenue a year ago. SanDisk doubled the
number of gigabytes sold year-over-year and shipped out 31%
more units. And most importantly, average selling prices per
gigabyte dropped 43% year-over-year but only 3% from the
previous quarter.
Not long ago, the 43% price fall would have been closer to
the quarter-over-quarter figure. Those days are over. As
CFO Judy Brumer explains it, "We implemented price increases
for selected products in both the retail and OEM channels."
The slightly weaker average unit price "was primarily due to
the mix of products sold" as consumers went for cheaper
storage cards.
Memory producers like Micron,
Samsung , and
Intel (Nasdaq: INTC) have stopped building
out their manufacturing lines for memory chips while
end-user demandtook one foot out of the grave. And when
Qimonda went belly-up under the constant
pricing pressures,
Texas Instruments (NYSE: TXN)
bought some of Qimonda's memory-making machineryto crank
out more analog signal processors next year. That's another
decent chunk of memory-production capacity off the table.
Management sees a stable supply/demand equation in time
for the holidays, driven by the
smartphone marketwhere SanDisk has focused its OEM sales
efforts. The top 10 smartphone designers that provide memory
card expansion slots buy at least some of their bundled
memory from SanDisk, including biggies like
Motorola (NYSE: MOT) and
Research In Motion (Nasdaq: RIMM). Of course,
the
Apple (Nasdaq: AAPL) iPhone line doesn't come
with card slots -- but SanDisk still hopes to see orders from
Cupertino if
Toshiba can't keep Apple fully stocked with
memory chips.
SanDisk shares jumped 10% on this impressive report,
breaking the 52-week-high barrier. SanDisk is still about 50%
cheaper than it used to be back in 2007, before that infernal
price war started. Will SanDisk scale those heights again?
Stranger things have happened. This wouldn't be a bad time to
invest in the surviving memory stocks.
This article was originally published as
Memory Stocks Are Back in Black: Time to Buy?on
Fool.com
Copyright © 2009 The Motley Fool, LLC. All rights
reserved.
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