Memory Trouble: Sector Is Reeling

Memory stocks are getting bashed by a flurry of troubling news.

In a talk at the J.P. Morgan tech conference in Boston yesterday, as Tiernan Ray reported here , SanDisk (SNDK) CEO Eli Harari provided a gloomy outlook on the prospects for the NAND flash memory sector. J.P. Morgan chip analyst Paul Coster followed up this morning with a downbeat analysis of Harari’s comments.

“SNDK’s CEO provided a sobering overview of the company’s near-term prospects, stressing the depth and length of the NAND cycle downturn, and the headwinds created by high oil prices and a slowing U.S. economy,” he wrote in a research note. “Overall, we came away confident in our below-consensus EPS forecast for ‘08, and sensed there could be downside risk to it.” He maintains a Neutral rating on the stock.

Meanwhile, as noted earlier, memory module maker Smart Modular (SMOD) reduced its guidance for its fiscal third quarter ending May 30, citing among other reasons a difficult pricing environment.

Adding to the grim atmosphere, Lazard Capital analyst Daniel Amir observed in a research note that Samsung is likely to reduce its NAND pricing by about 10% in the next few weeks “in order to be better positioned in the NAND market.” He notes that the company had attempted to hold the like on pricing, but customers were balking. “This data point is negative for SNDK as this could potentially lead to NAND flash price declines in the next few weeks following a fairly stable market in the past two months,” Amir wrote.

Amir also says that Micron (MU) is likely to buy Qimonda’s (QI) stake in Inotera, a joint venture with Japan’s Nanya. He notes that this would follow a recent JV between Micron and Nanya. He says the purchase price is likely to be about $1 billion.

Nope, nothing good to see here. And the stocks are getting whacked:

• Micron is down 55 cents, or 6.3%, to $8.21, at market close.
• Qimonda is down 20 cents, or 4.7%, to $4.09.
• SanDisk is down $1.01, or 3.4%, to $29.01.
• Smart Modular is down $1.03 cents, or 16.2%, to $5.40.

Update: Tiernan Ray reports that Qimonda’s CEO told investors at the J.P. Morgan tech conference in Boston today that the company is currently “in intense discussions with Nanya” about Inotera. “What’s important, whatever we do, is that we maintain adequate access to capacity,” he said, without elaborating further.

Comments

[BABUYAYA:]

GOOD POINTS. Having weathered the swings for the past 8 years on the supply side of Memory, position becomes almost as crucial as the underlying technology> SNDK will continue to reap the benefits of greater MLC penetration and Killer apps on the horizon (IE: SSD's): Samsung is already planing release of 3 bit per cell technology later in the year that has Both Tosh/SNDK ready to take cover. The 2000 LB gorrila is looking for a snack.

2008 May 21 08:11 AM