Pam, I did listen to the Lexar CC. Some impressions in random order:
- Recitation of the numbers more nauseatingly boring than in any CC I have ever listened to.
- Q & A: sounded a lot like amateur hour. Both the CEO and the CFO have very youthful voices (sound like 22 year-olds). Ditto about their speaking styles.
- Their main message: we have been doing a lot of things wrong, we know it, and we are changing our ways.
- Future decisions to be driven by profitability rather than growth considerations.
- (As expected) Q4 was unrepresentative because of the accounting change; some of its shipments will be recognized as revenue next quarter, but there are no similar carry-over sales from the prior quarter, since that was sell-to.
- They did mention "return to profitability" a lot.
- .02 - .04 eps for Q1 excluding legal expenses. The numbers you mentioned included legal expenses.
- They did mention (as I anticipated in a post yesterday) that Samsung's early shipping of MLC NAND is likely to help them starting in a few months.
- They said that they see NAND price upticks and shortage right now.
- They said that they do expect the new NAND entrants to come on strong -- though not immediately. They said that when the new guys started shipping in 2004, NAND prices dropped 50%.
- They repeatedly said: We will no longer try to match the price cuts of Sandisk / Toshiba. The reason: Sandisk / Toshiba only make 30% of all NAND, so, no matter how they price their products, they cannot satisfy market demand. In other words, we're going to sell our product even at higher prices.
- They didn't give a very clear, confident answer (I thought) when an analyst challenged their cash reserves vs. cash burn -- pointing out that the Toshiba award is not going to be collected any time soon. But they did say that they expected to be "cash neutral" in the next quarter.
- They intend to continue aggressively their legal actions against a variety of companies for infringement, and they said the Toshiba award will serve as a message. (They did not mention Sandisk, but they did mention Fuji).
I did not take notes. This is from memory. I probably left out several important things.
As they were speaking, the after-hours price of Lexar was plummeting. There was something in what they were saying, as well as in the delivery, that did not inspire confidence. Lexar's market cap is now less than the Toshiba award, and I think it may go down further after Toshiba's announcement that it will appeal. As this happens, Toshiba's incentives to buy Lexar should be increasing -- unless they think they can reverse all the damages. |
