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SanDisk sees PCIe flash take a dive

SanDisk became the PCIe flash market leader with its 2014 acquisition of server-side flash pioneer Fusion-io. Less than a year later, there is a lot less to that market and that is having a negative impact on SanDisk’s bottom line.

SanDisk’s $1.32 billion in revenue last quarter was below its initial forecast of from $1.4 billion to $1.45 billion, and down 12 percent from last year and 23 percent from the previous quarter. It cut its full year guidance for 2015 to a range of $5.4 billion to $5.7 billion from previous guidance of $6.5 billion to $6.8 billion. The new annual forecast would bring SanDisk revenue below its $6.6 billion from 2014. To compensate for the loss of revenue, the flash vendor announced it will reduce its workforce by around five percent.

Two factors hit SanDisk hard last quarter. It sold a lot less SAS solid state drives (SSDs) than expected, and larger customers started moving off PCIe cards onto 2 TB SATA SSDs. SanDisk CEO Sanjay Mehrotra blamed the SAS product problems on “execution” issues largely related to product qualifications. He attributed the PCIe problem and companies finding SATA drives good enough at a lower price. SanDisk hopes to change that with a new PCIe platform coming this month.

“Our results as well as 2015 revenue estimates for our Fusion-io PCIe solutions are significantly below our original plan,” Mehrotra said on the vendor’s earnings call Wednesday. “We are seeing a substantial portion of the PCIe [market] moving to lower cost solutions using enterprise SATA SSDs.”

Mehrotra is hoping server-side flash will rebound in 2016 with lower-cost PCIe cards built on captive NAND and using the NVMe interface.

“We expect to fully remain the market share leader [in PCIe], and we plan to address that in the 2016 timeframe with solutions using our captive memory as well as when we introduce NVMe solutions,” he said.

In the meantime, there will be pain and cuts at the company.

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Like all companies in this space, the rule is evolve or die. The market is changing - and odds are good that it will continue to change. (No, I don't know what or how or even when - if I knew the answer to things like that, I wouldn't be here writing about it.)

As the wags like to say, "change is the only constant." They also like to say "innovate or die." At least I think they like to say that. I sure do.

The trick for companies with revenues in the billions is to think and act like the feisty start-ups they once were. The instant they rest on the income from last year's drive or technology, their end is in sight.

About the worst thing they can do is contract with every downturn. Instead of using their best talent to find next year's breakthrough, they've just culled the ranks. Not only does it lower the moral of workers throughout the company, it makes retooling much more complex and expensive when things inevitably tick back up. For companies, it's a lose/lose situation of their own making.
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