From the CC, the trendline seems to be shrinking total NOR market, but Spansion staying at current level by increasing market share.
If Spansion was at 33% a year ago at $611M, total market was (annually) around $7.4B.
Now, Spansion at 40% at $631M, total market is $6.3B.
I don't know exactly Numonyx numbers. IIRC, they were at 37% a year ago, their revenue was $685M.
Now, at 31%, their quarterly revenue should be about $489M. So that's a $200M drop.
These are basically meltdown proportions. Will they at any point stabilize?
Anyway, Spansion has delivered on the share gains they promised but the NOR market continues to stink. If it continues to shrink, Spansion needs to more market share to stay at the same level.
I have to keep wondering if at some point Numonyx will not go under (or is bough out?). With the current conditions, I don't see any kind of IPO happening. How much could they possibly raise in an IPO?
There is something every quarter that happens which prevents Spansion from a significant upside surprise. This time, the majority of potential upside that disappeared was elimination of handset subsidies in Japan that resulted in significant drop of handset sales (which affects Spansion disproportionately). BTW, I think there was a ruling in California recently about undermining the validity of cell phones contracts. Cell phone contracts is what allows the subsidies of handsets, which keeps handsets higher than they otherwise would be. So there is a potential danger here in the US of the same thing happening as what happened in Japan.
If things go as planned, Spansion will be cash flow positive in Q4, which, I assume is after the $30M principal payment on one of the loans in the current liabilities. That's a stable level (finally).
Spansion is apparently running at full capacity at Fab 25 and JV3, but below current capacity at SP1. The ramp-up of sales from SP1 has been disappointing so far (mainly due to Japan handset sales drop). Hopefully, the Eclipse will start to take off in near future, using up SP1 output.
Looking backward, Spansion would have been in a far better financial situation without SP1, but with limited long term potential. SP1 made Spansion survival and prosperity much more of a challenge near term, but in the long term, hopefully, it will leave Spansion as the last man standing in the NOR market, taking not 40%, but 50 to 75% of the business.
With SP1 and SMIC, Spansion has enough capacity (and potential capacity) to achieve that.
Good to hear, BTW, that EcoRAM is on track for some orders and potentially, even revenues in Q4. Spansion needs to increase the TAM, so that it is not just in a death match with Numonyx...
Joe |
