SanDisk Drops 14% as Margins, Forecasts Miss Estimates

SanDisk Corp., whose chips store data in mobile devices, tumbled 14 percent after the company’s profit margins and sales forecasts fell short of some analysts’ estimates.

The shares of the Milpitas, California-based company slid $14.62 to $93.21 at the end of trading in New York, their first close below $100 in a month and the worst one-day decline since February 2009. The stock is up 32 percent this year.

SanDisk said it has held back on increasing production, seeking to avoid a repeat of supply gluts that in the past have caused semiconductor prices to fall below the cost of manufacturing. The chipmaker said it probably won’t have enough output to meet all orders this quarter.

“Sandisk’s top line is being supply constrained for the remainder of the year,” Ambrish Srivastava, an analyst at BMO Capital Markets, wrote in a note today.

Revenue in the current period will be $1.68 billion to $1.73 billion, Chief Financial Officer Judy Bruner said on a conference call yesterday. That compares with an average analyst estimate of $1.74 billion, according to data compiled by Bloomberg. Gross margin, or the percentage of sales remaining after deducting costs of production, was 46 percent in the second quarter. The average estimate was 49 percent.

Srivastava reduced his 2015 profit estimate for the company to $5.84 a share, from $6.18. He has the equivalent of a hold recommendation on the stock.

Sandisk’s profitability was hurt by an increasing proportion of sales coming from what it calls embedded flash memory. Those are chips sold to Apple Inc. for use in the iPhone and iPad, according to Sidney Ho, an analyst at Nomura Asset Management USA. SanDisk didn’t name specific customers.

The forecasts don’t include any contribution from the acquisition of Fusion-io Inc., which SanDisk said it was buying for about $1.1 billion on June 16.