SanDisk delays Analyst Day – Toshiba shares skid daily limit

Toroid-Composite-Render-Sea-Inlet_5Toshiba shares skidded 17 percent  ($2.5 Billion) to its daily limit Monday on the Tokyo Exchange after the company reported after market close Friday, that it was withdrawing its earnings guidance for the fiscal year ended March and cancelling a year-end dividend due as it expanded a previously announced investigation.

This is Toshiba Corp’s second probe into its own accounting in two years leaving analysts and investors in doubt as to just what the root problem is and its long term consequences on operations.

Toshiba said it is setting up a third-party committee for further investigation, and that it could not report its financial results for the year ended in March, normally announced around this time, until June or later.

SanDisk, Toshiba’s partner in NAND-Flash, announced on the 16th of April that the company was “postponing” their financial analyst day meeting. No future date was set by Sanjay Mehrotra CEO of SanDisk. SanDisk has missed their earnings estimates for the last three quarters and according to downgrades by market analysts appears to be suffering from poor execution on a number of fronts:

• Loss of Apple’s SSD business
• A too optimistic Enterprise strategy – missing 2TB SATA drive solution
• Poor integration of the Fusion I/O acquisition
• 3D NAND migration uncertainty – late entry position
• High margin retail business is slowing
• SanDisk must renegotiate licensing revenue with Samsung (Aug-16, now 40% EPS)
• Poor inventory management
• SanDisk was granted only 5 patents last year

Techeye Take

To be fair Toshiba’s problems are said to stem from accounting missteps in infrastructure projects – on the other hand “infrastructure projects” is a fairly inclusive term and could mean any number of things. Toshiba and SanDisk are in the midst of building new fabrication facilities in Japan. To date, there is no news that the accounting issues involve the semiconductor side of operations. The fact that building fabs is extremely expensive and requires a lot of cash on top of a mountain of debt has not been lost on those in the investment community. The negative reports from both companies has set off alarms in the analyst community which is now guarding against any “surprises” that might be in store.

Toshiba’s accounting shortfalls has placed the two companies in the crosshairs of the investment community given that the technology partnership may be exhibiting strains between the two competitors. Both are joined at the “hip” with production responsibilities and are in the throes of “reimagining” just how the combination can adjust before embarking on telling the world just exactly why either entity is a good investment choice going forward…,