SAN FRANCISCO Responding to the rapid deterioration of NAND flash prices in recent months, SanDisk Corp. implemented a series of cost-cutting moves, including cutting its global workforce by about 10 percent and reducing salaries for all executives, the company said Friday (Feb. 16).
SanDisk (Milpitas, Calif.) said it would reduce its work force by about 250 employees, with most of the cuts expected to occur early next month. The cuts will impact all areas of SanDisk's business and reflect a recent decision by the company to de-emphasize its USB private label business in favor of the more profitable SanDisk branded business, the company said.
Salary reductions include a 20 percent cut in base pay Eli Harari, SanDisk chairman and CEO, the company said. SanDisk's president and executive vice presidents will face 15 percent cuts in base pay, while other vice presidents will incur a 10 percent reduction, the company said.
SanDisk said it would institute a freeze in salaries for all other areas and a freeze in new hires for most areas of the company.
NAND flash was the glamour memory product of the moment in the wake of successful products that used it like Apple Inc.'s iPod. But prices for NAND are now expected to tumble by 65 percent in 2007.
"Industry wide NAND component pricing has deteriorated by approximately 50 percent in the past two months due to excess supply of NAND components coupled with first quarter seasonally weak demand," Harari said through a statement Friday. He added that the company now expects lower prices for many of its products to 30 to 40 percent below fourth quarter 2006 levels in order to maintain market share.
SanDisk expects to save about $30 to $35 million this year through the cost-reduction measures, the company. The reduction in force will decrease stock-based compensation expenses by about $10 million on an annualized basis, the company said.
SanDisk said it expects to incur a restructuring charge in connection with the reduction of about $15 million to $20 million, most of which will be recorded in the first quarter. About half of this restructuring charge is stock compensation expense related to the terms of the company's recent acquisition of msystems, SanDisk said.
"We believe that lower price points in the NAND industry will accelerate demand, particularly in the handset market, and will stimulate the emergence of new markets, fueling continued growth," Harari said. He added that the company believes it can "weather the current challenges" and "emerge an even stronger market leader when the next wave of growth in flash products emerges."