Tough Times at Sandisk

Flash memory maker Sandisk reported a terrible quarter last night as expected in what should be the best of times for flash memory, ex the macro evironment. Consumer electronics sales are quite strong relative to the rest of the economy, laptops with solid state drives are right around the corner for the mainstream of the market, there is a whole generation who don't know what camera film is.

A couple of highlights:

• product gross margins (GAAP) were -61%
• the company may issue stock down here ($9.25 in the aftermarket) despite declining Samsung's offer in the $20s

I'm not saying that Sandisk did anything wrong (other than not accepting Samsung's offer), this is what a semi down cycle looks like.

What really stinks about semiconductor investing in this decade is that you get all of the pain of the downside with little of the euphoria, end zone dances, obscene margins and multiple expansion of the upside.

Semi cycles tend to bottom when the commodity trades for a period below the actual cash cost of production (like right here). I'm hearing that the royalty portfolio for Sandisk is worth $6 - 8 per share so the stock will be a buy in the next few months if Samsung doesn't buy it first.