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SanDisk falls as fellow Apple supplier cautious

MILPITAS, Calif. (AP) -- SanDisk's shares fell in morning trading Thursday even after the flash-memory chip maker's first-quarter results topped Wall Street's expectations. As a supplier to Apple, SanDisk is coming under pressure because a company that makes chips used in the iPhone and iPad said revenue will slow down in the first quarter of 2013.

THE SPARK: On Wednesday, Cirrus Logic Inc. said sales of a particular chip have slowed down because a customer is moving to a newer component. Cirrus makes chips used in audio and energy products, and while it does not disclose customer names as a matter of policy, it's widely known that Apple Inc. is its biggest customer. Apple doesn't comment on announcements from its suppliers or disclose product plans. It is scheduled to report its first-quarter results Tuesday.

Also on Wednesday, SanDisk Corp. reported adjusted earnings of 84 cents per share on revenue of $1.34 billion. Analysts polled by FactSet predicted earnings of 80 cents per share on revenue of $1.31 billion.

THE ANALYSIS: Timothy Arcuri of Cowen and Co. said in a client note that SanDisk had a solid quarter, helped by a better gross margin. The analyst reiterated a "Neutral" rating.

Sterne Agee & Leach's Vijay Rakesh said that SanDisk appears well positioned to take advantage of a rebound in demand from original equipment manufacturers for handset-solid state drives in the second half of the year. The analyst believes that pricing will improve during 2013's second half, with better iPhone and tablet demand.

Rakesh maintained a "Buy" rating and lifted the company's price target to $70 from $60.

A representative for SanDisk did not immediately respond to an email seeking comment.

SHARE ACTION: Shares of SanDisk declined $2.65, or 4.8 percent, to $53.07. The stock has traded in a 52-week range of $30.99 to $58.92. For the year to date, the shares started the session up about 28 percent.