Regions Financial Corp-Alert: To cut NAND production 30% (Nikkei)

Article details and our impression — The July 24 morning edition of the Nikkeireports that Toshiba has decided to cut NAND production 30% as early as thismonth. The company has not commented on this as of yet. If the article is accurate,we need to know more about current inventory and to what extent production plansat major customers have been pushed back before we can judge this move’s impacton FY3/13 earnings. However, in an environment marked by low demand visibilityand considerable inventory, cutting production is the most effective way ofimproving supply/demand and earnings; such moves have produced significantresults in the past. Therefore, at the moment we think a production cut would have apositive impact on Toshiba. Although it is possible Toshiba could revise down whenit announces April-June results, we believe an environment that fosters expectationsfor NAND price growth would be positive for the shares.