SanDisk is a leading vendor of NAND flash memory products used in such devices as digital cameras, cell phones and personal computers. While sales of these products have remained strong, a glut in memory chips has led to a declining average prices and hurt memory chip makers' sales.
"Our recent NAND flash checks suggest that the market for the fourth quarter could be much worse than we expected," Amir said in a research note.
Amir said NAND inventory has "increased rather than decreased in the past two months and now stands at 12 weeks." He also noted that, "Pricing has been very aggressive, especially by Samsung, and we now anticipate a 26% decline in the third quarter."
He also said that "visibility into the fourth quarter suggests a weak demand environment with further capacity coming on board, which would lead to a challenging first quarter of 2009."
Other analysts have recently cited concerns about the memory chip market. In a research note published Monday, Citigroup analyst Craig Ellis said, he was "throwing in the towel on a tightening NAND supply/demand balance in the second half of 2008."
Amir also said that, despite Samsung's recent pronouncement about possibly making a bid for SanDisk, "We believe that this move is highly unlikely and is aimed at putting pressure on SanDisk in its royalty negotiations. In addition, we do not see SanDisk selling the company at the current stock price."
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, which is based in South Korea, last week disclosed that it was considering buying SanDisk which pushed the Milpitas, Calif.-based company's shares up more than 30%.
But some analysts have expressed doubts that the merger would push through. SanDisk shares have fallen more than 8% this week.