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SanDisk agrees to sell 30% of JV share amid losses

Posted: 22 Oct 2008 ?? ?Print Version ?Bookmark and Share

Keywords:joint venture? NAND? deal? partnership?

After experiencing a deep loss, SanDisk Corp. has gotten into a non-binding memorandum of understanding with Toshiba Corp. to sell around 30 percent of the present NAND fab capacity of the parties' joint ventures to Toshiba.

Earlier reports confirmed the deal. With the objective of increasing cash amid losses and a memory downturn, SanDisk anticipates to get cash and lower equipment lease obligations by around $1 billion with this transaction. As part of the deal, Toshiba will be boosting its NAND flash production.

The SanDisk-Toshiba joint ventures have various 300mm fabs at Toshiba's Yokkaichi Operations in Japan. The fabs are 50 percent owned by Toshiba and 50 percent by SanDisk. Fab 3 and Fab 4 at Yokkaichi Operations are presently known as Flash Partners Ltd and Flash Alliance Ltd.

The JV set-up
The new arrangement will make Toshiba the sole owner of 30 percent of the total capacity. The remaining 70 percent will still be managed by the Toshiba-SanDisk venture. The production capacity will be divided equally between Toshiba and SanDisk.

As a result, Toshiba's overall allocation of capacity in the two fabs will increase by about 30 percent, according to Toshiba. It said, ''By increasing its production capacity efficiently, Toshiba will increase sales of NAND flash memories.''

The move will also lower SanDisk's capital spending, strengthen its balance sheet and reduce NAND flash memory production commitments.

The parties will continue their existing joint technology development in advanced NAND and 3D read/write memory. SanDisk expects the transaction to be finalized in Q1 09.

''We appreciate Toshiba's strong support for SanDisk with this agreement. This is expected to reduce our capital spending, strengthen our financial position and increase our business flexibility while maintaining the economies of scale of Fabs 3 and 4,'' said Eli Harari, chairman and CEO, SanDisk, in a statement.

Partnership qualms
Still, the question remains: Is the Toshiba-SanDisk partnership falling apart?

For years, Toshiba and SanDisk have been partners in many joint NAND fabs. Perhaps this latest deal helped strengthen the partnership. SanDisk was trying to renegotiate the terms of the JV and forced Toshiba's hand.

Probably, the deal was an effort to fend off hostile bid. Samsung Electronics Co. Ltd recently launched a takeover bid for SanDisk, thereby raising doubts about the Toshiba-SanDisk partnership. Samsung and Toshiba are hated rivals in NAND flash.

SanDisk has rejected the bid. But Toshiba is not taking any chances and plans to protect its interest by buying up the fab equipment from SanDisk, according to reports.

Meanwhile, Toshiba is looking into the possibility of buying Spansion Inc.

Earlier, SanDisk said Q3 revenue was $821 million, a decline of 21 percent on a year-over-year basis. Net loss was $155 million or less $0.69 per diluted share, compared to generally accepted accounting principle net income of $85 million, or $0.36 per diluted share, in Q3 07.

''While Q3 revenue was down year-over-year, record Mbyte sales show the resiliency and breadth of our channels and the elasticity of our end markets in the face of sliding global macroeconomic conditions. However, excess inventories resulted in severe pricing pressures and a disappointing loss for the quarter including $109 million of inventory related charges,'' Harari said.

- Mark LaPedus
EE Times





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