Finanzas

4230
AUGUST 20, 2010

WILLIAM E. FRUHAN
CRAIG STEPHENSON

Flash Memory, Inc.
In May of 2010, Hathaway Browne, the CFO of Flash Memory, Inc., was preparing the company’s
investing and financing plans for the next three years. As a small firm operating in the computer and
electronic device memory market, Flash competed in product markets that reflected fast growth,
continuoustechnological change, short product life cycles, changing customer wants and needs, a
large number of competitors, and a high level of rivalry within the industry. These factors combined
to produce low profit margins and a continual need for additional working capital, which adversely
impacted Flash’s financial position and its ability to finance important investment opportunities.

Background
Flash wasfounded in San Jose, California, by four electrical engineers during the high tech boom
of the late 1990s. The common stock of the company was originally owned 100% by the founders,
and additional shares were subsequently sold to two engineers who joined the company as both
employees and owners. In 2010 these six individuals held the top management positions, comprised
the board of directors,and still owned the entire equity in the firm.
The company had enjoyed considerable success since its creation. As computers and other
electronic devices became increasingly complex and powerful, the demand for high performance
components, particularly memory, increased rapidly. From its founding, Flash had focused on solid
state drives (SSDs), which comprised the fastest growing segment inthe overall memory industry.
Industry data showed the SSD market grew from approximately $400 million in 2007 to $1.1 billion in
2009, and was further projected to grow to $2.8 billion in 2011 and $5.3 billion in 2013. SSDs were
particularly well suited for use in smart phones, laptop computers, and net books, and sales of these
products were expected to drive this robust growth.
Flash wasjust one of many companies in the industry. Giants like Intel and Samsung, as well as
smaller specialized firms like Micron Technology, SanDisk Corporation, and STEC, Inc., all saw the
industry’s potential and competed for market share. This resulted in intense competition between
product offerings, high rivalry, and low profit margins as a percent of sales.________________________________________________________________________________________________________________
HBS Professor William E. Fruhan, Jr., and Babson College Professor Craig Stephenson prepared this case solely as a basis for class discussion and
not as an endorsement, a source of primary data, or an illustration of effective or ineffective management. This case, though based on real events,
is fictionalized, and anyresemblance to actual persons or entities is coincidental. There are occasional references to actual companies in the
narration.
Copyright © 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. This publication may not bedigitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

This document is authorized for use only in GRF MBAG LVI-III by JUAN O'BRIEN at Pontificia Universidad Catolica
del Peru - Centrum from October 2012 to April 2013.

4230 | Flash Memory, Inc.

In the spring of 2010, Flash specialized in the design and manufacture of SSDs andmemory
modules that were sold to original equipment manufacturers (OEMs), distributors, and retailers and
ended up in computers, computing systems, and other electronic devices. Flash’s memory
components, which constituted 80% of company revenue, utilized flash memory technology—a nonvolatile memory that is faster, uses less power, is more resistant to failure when compared with
traditional...