Sandisk Stock Soars 3,400% Amid Profits, Yet Shifts Development to India
Sandisk, a leading memory chip manufacturer, has seen its stock price surge by 3,400% over the past year, climbing from around $37 in August last year to nearly $1,600 recently. The company reported exceptional profitability earlier this month, with a profit margin close to 85%, and a backlog of $91 billion in orders, mostly secured through long-term contracts with major cloud and artificial intelligence (AI) players. Revenue from AI server farms jumped from 12% to 38%, and operating cash flow rose to $7.1 billion. Bank of America raised Sandisk's stock price target to $2,500, citing growing demand for AI and cloud storage solutions.
Despite these strong financial results, Sandisk surprised many by laying off dozens of employees at its R&D center in Kfar Saba, Israel, which employs about 700 people. The layoffs occurred just months before the launch of an employee stock purchase plan (ESPP) that would have allowed workers to buy shares at a significant discount, potentially worth hundreds of thousands of dollars per employee. This move sparked criticism among staff, who viewed the timing as detrimental to their compensation.
Sandisk's Israeli R&D center is historically significant, originating from the acquisition of M-Systems, founded by Israeli inventor Dov Moran. The company itself was led for over two decades by Israeli founder and former CEO Eli Harari. After being acquired by Western Digital about a decade ago, Sandisk spun off last year and established the ESPP program, allocating millions of shares for employee benefits.
Industry sources indicate the layoffs relate to a strategic decision to transfer development of NVMe storage drives for cloud and AI servers to Sandisk's center in India. Meanwhile, the Israeli center will focus on developing a new "Stargate" drive with advanced controllers and higher storage capacities. The reduction in Israeli staff contrasts with the past when Western Digital employed around 1,200 people in Israel, now down to 700.
This shift reflects a broader trend of American tech companies expanding operations in India, driven by factors such as lower labor costs and challenges in the Israeli labor market, including extended military reserve duties and a strong shekel increasing local employment costs. Sandisk has not commented on the layoffs or strategic changes.
Summary: Sandisk's stock skyrocketed by 3,400% amid record profits and growing AI demand, yet the company laid off dozens in Israel as it shifts key development projects to India, sparking employee discontent over lost stock purchase benefits.