Shares in Lexar Media tumbled about 14% Fri. after the flash memo...

But the company said sales soared 100% to $163.2 million. In a conference call with financial analysts Thurs. evening, CEO Eric Stang said the disappointing results reflected higher than expected price cuts and price protection obligations. He also said Lexar suffered from “the inability to fully recognize the benefits of lower costs achieved during the quarter due to the timing of cost reductions.” A day earlier, rival SanDisk said “the pricing moves that we initiated early in the 2nd quarter stimulated consumer demand” and competitors didn’t -- or couldn’t -- match the low pricing (CED July 16 p7). Despite his company’s falling short of goals in the “very tough” quarter, Stang said Lexar still believed that “market dynamics will become increasingly favorable for our business model over the 2nd half of the year as new flash suppliers stimulate further cost reductions.” The expected growth in MP3 capability and 3, 4 and 5 megapixel cameras in cellphones should only drive demand more but that likely won’t be significant anytime soon -- especially in the U.S., which is only now starting to see one- megapixel cameras in cellphones, Stang said. He also said the company was upbeat about “the potential created” by its recently announced multiyear deal with Kodak: Lexar will manufacture and distribute Kodak-branded memory cards globally. The company is hoping Kodak cards represent 10-20% of what it sells in the 2nd half, Stang said, noting that the Kodak-branded products were targeted at mainstream consumers. There are now 55,000 stores worldwide carrying Lexar’s cards, up from 48,000 at the end of the first quarter, Stang said. He also said the company had 76 recognized patents, up from 72 at the end of Q1, and it expected to continue “aggressively” take action against any companies that infringed on them. The company has pending patent infringement suits against companies including Fuji and Toshiba, he said. Stang also said he expected discovery to end in Lexar’s trade secret case against Toshiba this quarter and a trial was “likely” to start first quarter 2005. The company sued Toshiba in 2002, claiming Toshiba stole trade secrets from it. Stang predicted that his company will report “$175 million or more” in 3rd- quarter revenue, but a loss of 1-5? per share. He said the company expected to return to profitability in Q4. Stang didn’t discuss the class action securities lawsuit filed against Lexar earlier in the week on behalf of shareholders (CED July 16 p7).