April 19, 2007 – NOR flash memory maker Spansion Inc. says its 1Q07 net loss slipped to $75.5 million (EPS $0.56) — more than twice what Wall Street expected, vs. a loss of $51.9 million a year ago — as 12% higher sales ($627.8 million) were not enough to offset “abnormally steep” price declines, particularly for high density NOR products. Both sales and EPS fell well short of what analysts had been projecting (EPS $0.24 on $678.2 million in sales).
“We are not pleased with market conditions that negatively impacted our financial performance,” said Bertrand Cambou, Spansion president/CEO, in a public conference call discussing the results. “Given this challenging environment, we are taking vigorous actions to respond and position Spansion to a successful path.”
Those actions involve “large-scale cost-cutting measures,” including selling nonperforming assets and consolidating operations, and will reduce 2007 planned expenses by $50-$100 million — including cutbacks in capex across the board except at the company’s 300mm SP1 facility, where it still plans to “go full speed” to reach 45nm production by mid-2008, and have its entire NOR family moved to 300mm/65nm by the end of this year (100% MirrorBit, not floating-gate). “Right now we have an investment in Texas and others and we’re going to pull them in favor of Spansion One,” Cambou said in the call.
The company also plans to “rapidly accelerate” its transition from 110nm to 90nm, and double shipments from 90nm products to represent 25% of revenue in 2Q, reducing cost/bit while increasing bit shipments by 15%-20% Q-Q.
Spansion execs declined to provide an outlook for 2Q results, citing a punishing pricing environment which Cambou described as “worse than I can even remember in my entire career.” He suggested that based on historical seasonal patterns, 2Q price erosions could be less severe than in 1Q, but acknowledged that the big ASP decline in 1Q “was not quite rational by its magnitude, and there is a possible scenario that this abnormal pattern will continue.”
Still, he indicated that 2Q should see “substantive demand” for 90nm, with “nice upside” already to Spansion’s 90nm backlog for CSID.
“We’re going to focus on operations and then the ASP environment is going to be the way it is and hopefully we’re going to be cutting costs on hand and using or factoring better, be back in line,” Cambou said.