Morning Commentary: SanDisk lower outright after disappointing earnings; Pernix deal eyed

By Rebecca Melvin

New York, April 16 – SanDisk Corp.’s convertibles traded lower on an outright basis in active trade on Thursday after the Milpitas, Calif.-based flash memory chip maker reported disappointing quarterly results followed by a stock downgrade at Credit Suisse to “neutral” from “outperform.”

“It’s the only name trading,” a New York-based trader said of the sister SanDisk convertibles.

SanDisk’s 1.5% convertibles due 2017 traded around 142, which was down 7 points, according to Trace data.

SanDisk’s 0.5% convertibles due 2020 traded at 102.625, which was down 2.5 points on the day, according to Trace.

Shares of the Milpitas, Calif.-based data storage chip maker slid 7% in the early going but were last down $3.61, or 5%, at $67.51.

Credit Suisse also slashed its price target on the shares to $65.00 from $75.00.

Late Wednesday, SanDisk reported first-quarter earnings of $39 million, compared to $269 million in the year-earlier period. Excluding items, the company earned 62 cents a share, which was below estimates for earnings of 66 cents a share, on revenue of $1.33 billion.

In the primary market, market players said that the Pernix Therapeutics Holdings Inc. deal for $120 million of six-year convertible senior notes looked cheap.

But one source said it would have to be cheap after the company lowered its forward guidance at the same time as launching the deal.

Pernix shares fell 15% in the early going Thursday ahead of terms for the deal that were expected to be fixed after the close.

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