Producing memory is a tough business, and Spansion's
I'll spare you the gory details and provide a quick summary. Compared to a year ago, revenue was down, operating loss was up, net loss was up, cash was down, and debt was up.
Not exactly the stuff of investors' dreams. So, what's going on?
Well, during the first half of this year, the average selling price (ASP) of Spansion's memory chips fell sharply. To be fair, ASPs have now stabilized -- meaning they aren't falling as quickly at the moment -- but we'll have to wait and see how long ASP stability can last. The deterioration of the other financial measures can be explained by the high fixed costs associated with Spansion's investment in a new 300-millimeter wafer manufacturing facility in Japan. Capital expenditures are also likely to increase from around 700 million to 1 billion.
I could continue being negative, as I have in the past (here and here), but let's take an optimistic look at the future.
There are several factors that may help Spansion turn the corner.
Spansion's new memory fab, called Spansion 1, should make it the low-cost producer in NOR flash, since it will be the only company making NOR flash on 300-mm wafers. Its competitors, mainly Numonyx, which was formed by combining the Intel
Also, it has to help that Numonyx is now on its own and doesn't have Intel's towering financial strength behind it. Lastly, Spansion recently announced an acquisition of Saifun Semiconductors
I'll let you decide whether these factors are enough to drive Spansion to profitability in the future. The stock is pretty cheap, given that it's trading at less than .50 times annual revenue, but it can always get cheaper.
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