Hi Clix,
Right. But since Sandisk doesn't make enough NAND to pick up all the demand, there are some dangers in this scenario. One of them is companies like PQI (which have a business model similar to Lexar's but make money) growing to fill the void, with Samsung's flash. The other, Samsung buying Lexar or simply replacing it in the flashcard market. As I mentioned before, I think Sandisk is much better off with a struggling and whining Lexar.
Sandisk, will have enough Nand soon unless the demand is rising at a more rapid pace than their addition to capacity. Personally, I think demand comes in lumps and things were slowing down a bit relative to supply growth as we saw disappointing Sales last Q. One thing I do not know is whose controller are co's like PQI, PNY, Kingston, Viking, Memorex, etc. are using? Do some of these have their own? Lexar surely has the controller technology for various form factors but unfortunately they have not made good business decisions and that has put them in this situation. Lexar is getting some lic and royalty payments, do not know from whom. Will have to look for their licensee's in the 10-Q.
By the way, they didn't burn cash this Q, so their demise is temporarily on hold.
Well, if you look at their BS closely you will see their looming problem. Yes, they did generate cash from operations but did you look at how? Here's what I see-
A/C Payable + Acc Liab - 157.7MM (generated from collecn of ARs)
Note payable to bank - 33.4MM
Total - 191.1MM
This is due for sure (no overstatement here).
Now, let's look at what they have-
Cash that can be used - 121.4MM
A/C Recvs - 70.5MM
Total - 191.9MM
Assuming their A/Rs are clean and collectible in this Q, they can take care of the Current Liabilities.
Now all they have is 146.8MM in inventory (whose valuation is a suspect for sure with declining prices) and 5MM in restricted Cash! They still have 60MM in debt which is carrying a hefty interest of 5.45 (this is more than they make ;-)) and is convertible (further dilution if they survive)!
They will have no working capital if all the Curr Liab are met! They will have OE of 20MM+ (without legal fees) next Q. They need the settlement money soon.
-Pam |
