It looks like Toshiba by cutting its earnings forecast also caused SanDisk's stock price to fall today. The following article is from MarketWatch.
Howard
Toshiba cuts profit view, citing weak chip prices, exit from next-generation DVD
By Jay Alabaster
Last update: 9:27 a.m. EDT March 19, 2008
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TOKYO (MarketWatch) -- Toshiba Corp. (6502.TO) Wednesday hacked about a third off its profit forecast for the fiscal year to March, citing weakness in flash memory chip prices and losses from exiting the next-generation DVD business.
The electronics conglomerate warned it now expects its net profit will be Y125 billion, down from the Y180 billion it forecast in October.
Toshiba's losses in its DVD operations were largely expected by investors, and the market reaction was positive when the company said it would pull out last month. The company said in total it lost about Y160 billion on its failed attempt to make the HD DVD format the standard for the next generation of DVDs.
But its continued struggle in flash memory may raise investors' eyebrows, as the chips have been its major source of profit. The company's forecast also includes a special profit of about Y130 billion from the sale of a building in central Tokyo, without which it would likely now be looking at a net loss for the fiscal year.
Toshiba said it was caught off guard by steep falls in prices of NAND flash memory chips, which are used for saving data in small consumer goods like music players and digital cameras, and sees no letup ahead.
"We now see prices falling 50% this fiscal year, after predicting 40% in October," said Corporate Executive Vice President Fumio Muraoka.
He added prices were likely to fall at the same rate next fiscal year.
Toshiba also slashed its operating profit outlook to Y230 billion from Y290 billion and trimmed its revenue outlook to Y7.7 trillion from Y7.8 trillion for this fiscal year.
Last month, Toshiba announced it would discontinue its HD DVD business, admitting defeat in what had become one of the consumer electronics industry's biggest format battles. Toshiba lost out to Sony Corp. (6758.TO), which along with an array of technology companies backed the Blu-ray format, preferred by major movie studios for high-definition DVDs released for the lucrative home market.
The company also said at the time it would invest Y1.7 trillion on two new NAND flash factories in Japan together with partner SanDisk Corp. (SNDK). The companies are looking to leapfrog main rival Samsung Electronics Co. (005930.SE), currently the world's largest maker.
But as NAND flash prices continue to fall, Toshiba's aggressive strategy could be called into question. The company slashed its operating profit outlook for the business to Y85 billion, about 37% of its group operating target. In October, it forecast Y150 billion, over half of its total.
Toshiba said it now estimates an operating loss of Y65 billion for this fiscal year from its HD DVD operations alone, plus Y45 billion in costs to wind down the business. The company said Wednesday it had previously foreseen a Y50 billion loss.
Toshiba issued the profit warning after the close of trading on Tokyo Stock Exchange; its shares rose 3.3% on the day to Y690 as the Nikkei 225 Stock Average climbed 2.5%. |
