Citigroup - MISS
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After the close on Tuesday, Spansion announced 1Q08 sales would fall below
guidance and current consensus ($570M vs. consensus $609M and guidance
$610M). The company cited weakness localized to China for the shortfall,
consistent with data points from other chipmakers and with our field checks in
March.
? We revise our estimates downward to reflect the shortfall. We expect minimal
impact to our gross margin assumption given the below-average margins
associated with China sales. Making no changes to our operating expenses
(presuming Spansion was unable to make adjustments), we lower our 1Q08
EPS to ($0.69) from ($0.66).
? Despite the shortfall, we anticipate positive cashflow from operations from
Spansion and model a $84M increase. Free cashflow, however is expected to
be -$132M given Spansion's cap-ex of ~$200M-250M in 1Q08. We anticipate
inventories will be above our current expectations, but still down q/q, reflecting
known inventory write-downs.
? The company will host their quarterly conference call on 4/16/08, where we
expect further financial details.
Changes To Our Model
We are lowering our SPSN 1Q08 revenue estimate to $570M, as we now model
for a sequential decline of 5% in 1Q08 NOR units from flat previously. Our
1Q08 gross margin estimate falls 10bps to 15.7%, as Spansion pointed to the
shortfall in revenue a result of weakness in wireless NOR sales in China, a
relatively low-margin business. With our 1Q08 OpEx estimate unchanged at
$159M, our GAAP EPS goes to ($0.69) from ($0.66) previously. Off of a lower
1Q08 base, we are lowering our 2008 revenue and GAAP EPS estimates to
$2,470/($1.69) from $2,589/($1.43) previously.
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From me ->
Modell: 2008 = 2470 => 2009 = 2600
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Price Target = 7$ (fair enough for me)
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