SanDisk cuts 15 per cent of its workforce

07 Nov 2008

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The world's largest maker of memory cards used in cameras and mobile phones, SanDisk is reducing its workforce by 15 per cent, downsizing some 450 people out of its 3,000-strong world-wide workforce in a bid to contain costs.

Reports in the media suggested that falling prices on account of a chronic over-supply in the flash memory market coupled with the existing recessionary economic trend across the world have worsened the situation for the company.

Earlier this week on Tuesday, SanDisk announced worse than expected quarterly losses of $155 million, reporting sales down by 21 per cent to $821 million as compared to the same quarter a year ago. The company had posted a loss of $68 million last quarter as well, and is scaling down its capital expenses in the wake of its deteroriating financial situation, which is down from $2.4 billion to $1.9 billion, and expected to go down further to $1.3 billion in 2009.

The company has said that a large number of its 700 employees in Israel would lose their jobs, around 105 if the job cuts there are at the predicted 15 per cent. Reports suggested that the company already downsized around 40 people there in May, and made around 100 people redundant last year after the $1.5 billion acquisition of M-Systems in mid-2006 in a move to increase business efficiency.

SanDisk was also the target of a $6 billion takeover attempt by Samsung earlier in the year, which did not materialise as Samsung refused to raise its offer to meet SanDisk's expectations, citing SanDisk's depressed share price (See: SanDisk rejects Samsung's $5.85-billion bid), prompting it into a deal with Toshiba, the No 2 flash memory products maker behind Samsung.  (See: Toshiba's SanDisk deal forces Samsung to abandon $5.85-billion bid)

SanDisk makes around $400 million annually from Samsung as part of licence revenue, which Samsung had threatened to cut off though legal action during its bid.

SanDisk's stock went up this week after a Goldman Sachs analyst gave the stock a "Buy" rating. The analyst, James Covello, called SanDisk shares "now too attractive to ignore'', saying that its stock had been battered by Samsung's withdrawal of its bid to acquire the company.

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