Toshiba lowers 2008 outlook on NAND weakness, HD exit

Mar. 19, 2008 – Toshiba has slashed its FY08 profits forecast by 30% (to ¥125B/US $1.28B), citing the exit of its HD DVD business — but also surprising weakness in NAND flash pricing.

“The semiconductor business has seen a significant decrease in operating income due to a larger than anticipated declines in sales prices of NAND flash memories,” the company said in a statement. Sales projections in the company’s semiconductor biz have been reduced by about 3.5% (to ¥1.39T/$14.23B), though double that (-7.2%, to ¥538B/$5.51B) for the memory segment. Expectations for operating income in the chip biz are taking a bit hit, down -43% to ¥85B ($870.3M). That means a Y-Y decline of -34%, instead of an anticipated 17% increase.

The other major factor weighing down Toshiba’s financials is the discontinuation of its HD DVD business after ceding the marketplace battle with the Sony-backed Blu-Ray format. Losses incurred by this move were known to investors, but the depth of the memory woes was not, notes a Marketwatch report. The company’s pledged investments in new NAND flash facilities with partner SanDisk may now come across as exceedingly aggressive and risky, given the prolonged slide in NAND pricing.

Overall, Toshiba predicts net sales will be roughly the same, but operating income too will take a hit, about -21% to ¥230B ($2.35B).


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