SanDisk Ships New Memory Chips

SanDisk Corp. (SNDK) has begun shipping flash memory chips (X4) that contain 64 GB or 4 bits of data, which is double the amount currently available in the market. The X4 technology has been under development for the last five years.

SanDisk is the largest supplier of flash storage card products based on NAND technology. The company has a strong product portfolio and is a significant player in the U.S. flash memory market.

The company declared that these chips will lower its manufacturing costs. SanDisk, in partnership with Toshiba, has reduced its cost of production significantly, which should help improve its gross margin. According to Gartner, SanDisk will benefit from the move to more advanced chips in 2010 and 2011.

This apart, SanDisk is aggressively reducing capital expenditure outlay and slowing captive supply growth to better manage inventory. SanDisk forecasted a cost reduction range of 40% to 50% for 2009, with strong product cost reduction in the fourth quarter.

The company posted better-than-expected second quarter results, buoyed by increased pricing, but has provided a conservative guidance for the third quarter. SanDisk believes that industry pricing will be stable or a tad down in the second half of the year.

SanDisk has forecasted total revenue of between $725.0 million and $775.0 million, including license and royalty revenue of between $110.0 million and $115.0 million for the third quarter.

Back in May, the company had signed a patent agreement with Samsung, giving the latter the right to use its X3 and X4 technology. The company expects that this agreement will start impacting the License and Royalty revenue from the second half of the fourth quarter of 2009.

SanDisk is set to announce to its third quarter results on Oct 20. We currently have a Neutral rating on the stock.

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