SAN JOSE, Calif. -- Spansion Inc. is looking to make a big comeback.
Will it succeed this time around? Or is it doomed to fail--again? Analysts
are mixed about Spansion's future prospects.
Last month, Spansion said that it had emerged from Chapter 11 reorganization.
As report, on March 1, 2009, Spansion (Sunnyvale, Calif.) filed for Chapter 11
bankruptcy protection. The NOR flash maker was late to emerge from Chapter 11.
It was supposed to emerge in the first quarter of 2010.
''Spansion stayed in Chapter 11 four plus months longer and lost more market
share than planned,'' according to a new company presentation. It also assumed
''$26 million (in) additional bankruptcy related cash cost.''
On the positive side, business is up for Spansion and its rivals. ''Pricing
is better than anticipated on unforeseen NAND/NOR supply constraints,''
according to Spansion.
During the reorganization, Spansion focused its business on serving embedded
and targeted wireless applications. Spansion has also made several announcements
after emerging from Chapter 11.
In May, for example, Spansion announced its new Japanese subsidiary, Spansion
Nihon Ltd., acquired the distribution business of Spansion Japan, Spansion's
former subsidiary, for $12.5 million. Spansion Nihon will continue to serve the
Japan market primarily through the Fujitsu sales channel, extending a
longstanding partnership between Spansion and Fujitsu that dates back to 2003
when AMD and Fujitsu created Spansion.
Spansion Japan, located in Aizu-Wakamatsu, continues to manufacture wafers
and provide sort services for Spansion on a foundry basis. Spansion Japan, which
is no longer part of Spansion, is also suing Spansion.
In March, ''Spansion Japan filed an amended general unsecured proof of claim
in the U.S. Bankruptcy Court asserting that it has been damaged in the amount of
approximately $936 million as a result of the November 19, 2009 foundry
agreement rejection order. (Spansion) believes that it has strong defenses to
the amount of Spansion Japanís proof of claim and intends to vigorously contest
this matter,'' according to a filing.
In May, Silver Lake Sumeru, the middle market investment group of Silver
Lake, announced that it recently closed on an investment in Spansion. Silver
Lake Sumeru is appointing two of the Spansion board members who will assist the
company ''as it seeks to evolve from a capital-intensive broad-based flash
memory business to a focused cash-flow-generative supplier serving embedded and
targeted wireless markets.''
Last week, Spansion provided a new and complex forecast for Q2, based on
''fresh-start accounting.'' On a GAPP basis, Spansion is expected to report
sales from $240-to-$260 million in the second quarter. GAPP inccome is expected
to be $290-to-$330 million.
On a non-GAPP basis, Spansion is expected to report sales from $285-to-$305
million in the second quarter. Non-GAPP inccome is expected to be $15-to-30
million. The lower net is based on a $294 million charge in ''fresh-accounting''
adjustments.Guidance for full year 2010 is net sales of $1.15 billion to $1.24 billion
and adjusted EBITDA of $260 million to $300 million.
And this week, the NOR flash maker received authorization to list its common
stock on the New York Stock Exchange (NYSE). Spansion anticipates that trading
will begin on or about June 23, 2010 under the symbol "CODE." Spansion is
transitioning to NYSE after trading on NYSE Amex since May 18, 2010.
Can Spansion succeed this time around? Time will tell, as the company faces some
Analysts were mixed. ''The reason for their financial troubles was that they
loaded up on debt to fund a 300-mm wafer fab and then the market tanked,'' said
Gregory Wong, an analyst with Forward Insights. Spansion had a 300-mm fab in
Japan. Spansion Japan has assumed control of the plant.
''As a leaner organization and an asset-light strategy, they should be able
to maintain a presence as a smaller entity focused on the embedded market but
theyíll have to contend with more aggressive players such as Macronix and
Winbond,'' Wong said.
''For the record: I am bullish on Spansion. They have dramatically reset
their goals,'' said Jim Handy, an analyst with Objective-Analysis.
''In the past both Spansion and Numonyx tried to prevent NAND from displacing
NOR in their biggest market, camera phones, by pricing their high-density NOR
competitively against a NAND+NOR or all-NAND alternative,'' Handy said. ''This
forced them to perform over-aggressive and costly process migration and it put
their NOR prices at the mercy of NAND's dramatic price collapses.''
Now, Spansion has a different strategy. ''The new Spansion has shed that
business, keeping the part of NOR in cell phones that doesn't compete against
NAND along with all of the NOR market outside of cell phones,'' Handy said. ''In
these markets they have perhaps the lowest cost structure of any NOR maker, so
they will do well against the many smaller NOR makers and will compete
head-to-head with Micron/Numonyx.''
''With the current conservative management style and using the capex
investments made in 2007-2008, I see Spansion being able to right their ship,''
said Alan Niebel, president of Web-Feet Research.
''The current shortage of NOR with its higher prices buoys their expectations
to be able to meet their 2010 plan of $1.15-1.24 billion (in sales). As to their
longevity, I see them still being a player in the NOR market and perhaps some
specialty NAND markets,'' he said. ''Perhaps, they will get back to the $2
billion revenue range if the markets grow in the next 3-5 years. Otherwise, they
will stay fairly flat revenue-wise for the next three years.''