Hi Sam,
Our resellers may not accept our price increases from the first quarter of 2005 or in the future, if any, and, if we do not lower our selling prices to be consistent with our competitors' selling prices, our resellers may decide to reduce their orders, purchase from other vendors or return unsold product to us. In the past several months, we have lost product placements to our competitors at Wal-Mart and Sam's Club, Comp USA and other resellers in part because of our selling price strategy. In particular, CompUSA has terminated their relationship with us. In addition, at Wal-Mart and Sam's Club, which accounted for approximately 17% of our gross revenue in the first quarter of 2005, we may experience a significant decline in sales due to their addition of other vendors products into their stores.
This is just my educated guess- I think Lexar is unlikely to meet the $200MM rev guidance for this Q. Also, I wouldn't be surprised if they markdown their inventory in one of these quarters. Lexar spoiled their relationship with Samsung a few Q's ago and will pay a price for a while with irregular shipments from their main supplier.
-Pam |
