SanDisk, one of the worlds largest flash memory manufacturers, is getting ready to shed some weight. With the economy still on the downturn, the Milpitas, CA-based maker of Secure Digital cards and solid state hard drives, among other things, may be releasing up to 15 percent of its workforce, or approximately 450-500 employees.
The layoffs come after a rough several weeks for SanDisk. Several weeks ago, the flash memory maker announced that it would be posting a $155 million net loss on the third quarter, and in order to shore up operating costs, department restructuring would follow. Following the quarterly report back in October, Samsung withdrew its bid to purchase SanDisk for $5.9 billion ($26 a share), at which point SanDisk’s stock began to drop as much as 32 percent during trading.
"Your surprise announcements of a quarter billion dollar operating loss, a hurried renegotiation of your relationship with Toshiba and major job losses across your organization all point to a considerable increase in your risk profile and a material deterioration in value, both on a stand-alone basis as well as to Samsung," said Samsung CEO Lee Yoon-woo in a letter to SanDisk back in October. "As a result of these developments, we are no longer interested in acquiring SanDisk at $26 a share."
With the entire flash industry feeling the squeeze due to falling flash prices, SanDisk gives us a good representation on where the entire market stands. In early October, SanDisk sat at above $18 a share. Now, with Samsung no longer interested (at its original price) due to SanDisk’s financial troubles, the stock currently hovers just below $10. The SanDisk situation is reminiscent of Yahoo, with the company turning down the initial offer from Samsung because SanDisk CEO Eli Harari claimed the flash maker was being undervalued, especially when the value of its Intellectual Property was considered. While SanDisk seems to be in a free fall for now, one can only speculate on where the rest of the industry will go from here.