Sandisk stock jumped 3,400% in a year, but that didn't prevent layoffs
Memory chip manufacturer Sandisk has fired dozens of employees from its development center in Kfar Saba as it transfers key projects to India. The move has sparked resentment among staff, as it comes just months before the launch of an employee stock purchase program offering significant discounts.
The stock of memory chip manufacturer Sandisk has become one of the biggest sensations of the past year. Alongside other memory giants like Micron and SK Hynix, the stock has jumped 3,400% in just one year — from about $37 last August to a near-historic peak of $1,600 today.
The company's situation has not been this good for a long time. At the beginning of the month, Sandisk shattered profit and revenue forecasts, presenting an exceptional profitability rate of almost 85%. The order backlog has grown to $91 billion, with the share of AI server farms in total revenue jumping from 12% to 38%, while cash flow from current operations soared to $7.1 billion. Bank of America has raised the stock's target price to $2,500.
However, Globes has learned that last week dozens of employees were fired from the company's development center in Kfar Saba, which employs about 700 people. The move surprised many and sparked a storm on social media, especially given the company's excellent financial data. Employees are resentful over the timing, as the layoffs occurred just months before the launch of an Employee Stock Purchase Plan (ESPP). Because of the sharp rise in stock price, the actual discount rate could have reached hundreds of dollars per share, and the layoffs may save the company millions.
Identity Card — Sandisk
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Field of activity: Memory chips and storage drives for mobile devices and servers.
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Market value: 233 billion shekels.
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Employees: About 11,000 worldwide.
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Founder: Eli Harari (81), who served as CEO from 1988 to 2010.
Deep roots in Israel
The Sandisk development center in Kfar Saba is one of the oldest in Israel, originating from the $1.55 billion acquisition of Dov Moran's M-Systems twenty years ago. About a decade ago, Sandisk was acquired by Western Digital, but split off last year. During the split, the company established an ESPP, allocating 4.3 million shares (about 2.9% of share capital) for employee purchases.
Price of the missed benefit
Ronen Solomon, CEO of Altshare, explains: "The ESPP allows an employee to set aside a portion of their salary each month to purchase company shares at a discount, usually about 15%. When the stock jumps, it creates a very significant profit for the employee. In Sandisk's case, an employee could purchase a $1,600 share for $700-$800. However, I am skeptical that a large corporation would fire employees specifically because of an approaching ESPP pulse; such programs are part of the ongoing compensation mechanism."
The assessment that layoffs are unrelated to the stock plan is reinforced by the fact that the company is not firing employees outside of Israel. However, Solomon notes that the gap between the market value and the purchase price is considered taxable employment income, and employees also face currency exposure since salaries are in shekels while stocks trade in dollars.
Moving to India?
Industry estimates suggest the layoffs were carried out as global management transfers the development of NVMe storage drives for cloud servers and AI to India. The Israeli development center will instead take responsibility for the "Stargate" drive, focused on new controllers and chips for server farms.
Eyal Solomon, CEO of recruitment firm Ethosia, explains that India has become a preferred destination for job transfers. "From conversations with executives, a worrying picture emerges of low availability of Israeli employees due to prolonged reserve service, alongside a strong shekel that increases their cost. An Israeli employee can cost the company up to 40% more than an equivalent Indian employee," he adds.
No response was received from Sandisk regarding the news.
