The Milpitas, Calif.-based company said on Friday it would be laying off about 250 people, reducing executive salaries, freezing employee salaries and instituting a hiring freeze in all but "strategic areas." The moves are expected to save SanDisk US$30 million to $35 million annually.

SanDisk blamed a dramatic drop in NAND flash component pricing - a deterioration of 50 percent in the past two months - as well as the need to tighten its supply chain organization in the wake of its for the reductions.

Bill Blackthorn, company spokesman for CompAmerica, a SanDisk customer that sells PCs, servers and mobile devices to government and corporate buyers, said the flash vendors should have seen this coming. "The market is so confused, nobody knows what they want. They can't distinguish between a USB thumb drive, a flash memory card, the need for a flash reader, a 7-in-1 [card reader], a 9-in-1 [card reader], a 25-in-1 [card reader]. It's an insanely confusing marketplace."

The company was likely not surprised by the plunge in pricing. According to company spokesman Bob Goligoski, SanDisk regularly sees its prices drop by 40 percent to 50 percent a year. "So we base our projections on pricing knowing that that is the case." Yet a company press release quotes CEO Eli Harari as suggesting that overall market conditions for NAND components coupled with a weak demand in the first quarter is affecting pricing "for our retail and OEM products at a steeper rate than we had been anticipating."

The layoffs announced by SanDisk will hit across all functional areas, but they will affect certain areas more, "such as the private-label USB drive business, which we are de-emphasizing, given current industry trends," Goligoski said. An 8-K filed this week said the labor force cuts will "impact functions related to operations, engineering, sales and marketing, and administration within SanDisk, and will primarily be based in the United States and Israel and, to a lesser degree, other international locations."