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SanDisk Posts Loss as Product Prices Drop Sharply

SanDisk, a maker of flash memory for cell phones and digital cameras, reported a quarterly loss as prices for its main products fell, sending its shares downward .

The first-quarter net loss was $575,000, or nil cents a share, compared with year-earlier net income of $35.1 million, or 17 cents a share.

Revenue rose 26% to $786 million.

Excluding the impact of acquisition-related charges, first-quarter income was 19 cents a share, compared with 44 cents a share in the quarter last year.

Analysts had been expecting earnings of 18 cents a share before special items on revenue of $759.8 million.

"First-quarter results reflected the current difficult market conditions," Chief Executive Eli Harari said in a statement. "Our industry experienced excess supply, sharp price declines and depressed margins."

He said weak retail consumer demand exacerbated those conditions.

SanDisk forecast a pickup in demand during the second half of the second quarter, but said excess supply and depressed pricing might continue through the quarter and the summer. That would put pressure on margins.

"Our outlook is optimistic for renewed growth heading into the fourth quarter of 2007 and forward to 2008," he said.

He said that outlook was based on building the company's multimedia handsets business and "exceptionally attractive price points" for some of its consumer products.

During the quarter SanDisk reported on Thursday, the mobile market became the company's largest revenue generator, Harari said.

Another highlight was signing a licensing agreement with Hynix Semiconductor and a deal with Dell to sell notebook computers that use SanDisk's 32-gigabyte solid state drive.

In February, the company announced plans to cut 10% of its work force and reduce executive salaries to compensate for a collapse in prices for flash memory chips.

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