Excluding the impact of acquisition-related charges, share-based compensation expense and the related tax effect, the second quarter non-GAAP net loss was ($22) million, or ($0.10) per diluted share, compared to the second quarter 2007 non-GAAP net income of $72 million, or $0.30 per diluted share.
SanDisk is delaying the start of the next phase of production ramp in Fab 4 and now expects it to start no sooner than April 2009. The company is also pushing out its decision to invest in Fab 5 until market conditions improve. These actions are aimed at reducing future capital expenditures and inventory growth in order to maintain a strong balance sheet.
Our second quarter sales were well below our expectations due to the rapid deterioration in consumer confidence which impacted our sales in U.S. retail and to handset OEMs. Product gross margin was negatively impacted by the lower sales volume and a substantial inventory write-down, said Eli Harari, Chairman and CEO. Overall demand is expected to improve in the upcoming holiday season; however, industry-wide Flash inventories remain excessive and pricing and margins will therefore remain under pressure until supply and demand come into balance. We are taking significant actions to slow our captive supply growth, which will reduce our capital expenditure commitments, and allow us to better manage our inventory. We are also continuing to improve our cost structure through transitions to 43-nanometer MLC and the industrys first commercialized 3-bits per cell NAND flash. While the industry downturn has been more pronounced and severe than expected, we are optimistic about our long-term renewed growth when the market rebounds.