SanDisk hits 5-year low after Samsung drops bid

NEW YORK: Shares of SanDisk Corp sank to their lowest level in five years on Wednesday, after Samsung Electronics Co. dropped a buyout bid for the maker of flash memory components.

The South Korean electronics giant withdrew a $26-per-share offer, saying it hasn't made any headway with SanDisk for nearly six months. But Samsung suggested it may be interested in buying SanDisk for a lower price.

For its part, SanDisk has rejected the bid, worth $5.85 billion, as too low. But the company said Wednesday it has "repeatedly outlined a clear path to hold further discussions" on a possible buyout.

Citi Investment Research analyst Craig A. Ellis said Samsung's action leaves SanDisk's shares vulnerable to "abysmal" industry conditions. An oversupply of memory chips and low prices are hurting the market even though demand remains high.

Ellis said that since July 22, when Samsung made the offer, the price of NAND memory chips used in digital devices like cameras and music players have dropped 40 percent. This, he wrote in a note to investors, "sharply erodes sector profitability prospects into 2010."

SanDisk is the world's largest supplier of flash storage card products and Samsung is the world's largest manufacturer of NAND flash memory chips.

SanDisk's stock tumbled $4.57, or 31 percent, to $10.19 in early afternoon trading, its lowest level since April 2003 and less than half the price Samsung had offered.

On Monday, the Milpitas, California-based company posted a third-quarter loss of $155 million as excess inventory forced it to cut prices. The company's per-share loss was well below Wall Street's expectations, though revenue was above estimates.