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SanDisk's memory chip sales weak, shares fall

Sandisk's new solid state drive is displayed at the Sandisk booth during the 2014 REUTERS/Pichi Chuang

By Lehar Maan and Anya George Tharakan

(Reuters) - SanDisk Corp said it expects fourth-quarter revenue to be lower than its forecast, citing weaker-than-expected sales of retail products and flash memory storage chips.

Shares of the company, which supplies memory chips for Apple Inc's iPhones, fell nearly 14 percent in heavy trading on Monday. SanDisk's warning also spooked investors in rival Micron Technology, whose stock was down 5 percent.

Analysts said SanDisk's weak revenue forecast was partly due to a glut in the memory chip market as market leader Samsung Electronics Co Ltd shifts focus to its chip business to help make up for declining smartphone sales.

Pacific Crest Securities Monika Garg said lower internal sales of flash memory chips, also known as NAND chips, at Samsung meant that the company was selling its chips in other markets, a move that was affecting pricing.

Micron said on its first-quarter earnings call last week that one of its competitors had moved NAND production away from its "own internal mobile consumption", without naming the company.

Several analysts estimated last week that Samsung's chip business earned more than its mobile business in October-December, buoyed by healthy demand for memory chips from personal computers and smartphones.

NAND memory chips are widely used in smartphones, cameras and other mobile devices to store music, pictures and other data.

Raymond James analyst Hans Mosesmann said he expected the glut in the market to be a short-term issue that would ease once manufacturers start cutting capacity.

SanDisk, which is increasingly using its chips to build and sell solid-state drives directly to companies and consumers, had already warned of supply constraints for the quarter.

The company said on Monday it expects revenue of $1.73 billion for the quarter ended Dec. 28, down from its previous forecast of $1.80 billion to $1.85 billion.

Analysts' on average were expecting revenue of $1.83 billion, according to Thomson Reuters I/B/E/S.

SanDisk also cut its adjusted gross margin estimate to about 45 percent compared from its forecast of 47-49 percent.

SanDisk will report its fourth-quarter results on Jan. 21.

(Reporting By Lehar Maan in Bengaluru; Editing by Saumyadeb Chakrabarty and Savio D'Souza)