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SanDisk Announces Third Quarter Results


* Revenue Grows 38% Year-Over-Year Fueled by Mobile Phone Cards and International Sales
* Product Gross Margin Increased Significantly from Q2 2007
* 248% Increase in Megabytes Sold Over Q3 2006

SanDisk® Corporation (NASDAQ:SNDK), the world’s largest supplier of flash storage card products, today announced results for the third quarter ended September 30, 2007. Third quarter revenue increased 38% on a year-over-year basis to $1.037 billion and net income in accordance with U.S. Generally Accepted Accounting Principles (GAAP) increased to $85 million, or $0.36 per diluted share, compared to GAAP net income of $28 million, or $0.12 per diluted share, in the second quarter of 2007. GAAP net income was $103 million, or $0.51 per diluted share, in the third quarter of 2006.

Excluding the impact of acquisition-related charges, stock compensation expense and the related tax effect, third quarter non-GAAP net income increased to $130 million, or $0.54 per diluted share, compared to second quarter 2007 non-GAAP net income of $72 million, or $0.30 per diluted share. Non-GAAP net income was $124 million, or $0.61 per diluted share in the third quarter of 2006.

“We are very pleased with our third quarter results. Demand was exceptionally strong in international retail, following our strategy to aggressively expand our business outside of North America. In the mobile phone market we sold a record 42 million units, reinforcing the enormous global opportunity which is unfolding. USB revenues also contributed significantly to our growth in the quarter,” said Eli Harari, Chairman and CEO. “Gross margins and the pricing environment improved substantially and excellent execution at Fab 3 allowed us to respond to the surge in customer demand. We expect demand to remain strong through the fourth quarter holiday season although we may not be able to meet 100% of the demand.”
Key Metrics and Highlights

* Product revenue was $919 million in the third quarter, up 36% year-over-year and 28% sequentially.
* License and royalty revenue for the third quarter was $119 million, up 52% year-over-year and 11% sequentially.
* Total megabytes sold in the third quarter increased 248% on a year-over-year basis and 54% from the second quarter of 2007.
* Average price per megabyte sold declined 61% on a year-over-year basis and 16% sequentially.
* Average retail card capacity in the third quarter was 1616 megabytes, up 83% from the third quarter of 2006 and up 10% sequentially.
* GAAP product gross margin in the third quarter was 24.3%, compared to 32.4% in the third quarter of 2006 and up from 16.2% in the second quarter of 2007.
* Non-GAAP product gross margin for the third quarter was 26.4% compared to 32.7% in the third quarter of 2006 and up from 19.0% in the second quarter of 2007.
* GAAP operating income for the third quarter of 2007 was $109 million compared to GAAP operating income of $128 million in the third quarter of 2006 and up from $14 million in the second quarter of 2007.
* Non-GAAP operating income was $162 million, or 16% of revenue, compared to non-GAAP operating income of $158 million, or 21% of revenue in the third quarter of 2006 and up from 9% in the second quarter of 2007.
* SanDisk expanded its line of Sansa® players with the Sansa View – a video MP3 player with a vast array of features, and the Sansa Clip – a colorful, hip, wearable value priced MP3.
* SanDisk began offering a line of Solid State Drives (SSDs) for resale to system integrators.
* SanDisk launched the SanDisk Express™ line of high-performance products to deliver best-of-class solutions for professional videographers and photographers who demand speed, reliability and durability.
* SanDisk introduced new USB flash drives such as the Cruzer® Micro 8 Gigabyte in worldwide markets and “extra-style” USB drives like the Cruzer Colors + in Japan and the Fleur, SNAP and TAG in Europe.
* Fab 3 reached its maximum planned production wafer output in the third quarter. Fab 4, our second 300mm wafer fabrication facility in Japan, started first production wafers using 56-nanometer process technology and is expected to aggressively grow our captive supply in 2008.
* SanDisk opened its first captive production facility in China. The plant will focus on assembly and testing of advanced Flash memory cards especially for the mobile phone market.

Scheduled Interviews
SanDisk Corporation Chairman and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC’s “Closing Bell with Maria Bartiromo,” on October 18, 2007 at approximately 1:25 p.m. PDT. Judy Bruner, SanDisk’s Executive Vice President, Administration and CFO, is scheduled to appear on Bloomberg TV’s “Starting Bell,” October 19, 2007 beginning at approximately 6:40 a.m. PDT.
Conference Call
SanDisk’s third quarter 2007 conference call is scheduled for 2:30 p.m. PDT, Thursday, October 18, 2007. The conference call will be webcast by CCBN and can be accessed live, and throughout the quarter, at SanDisk’s website at and at for registered users. To participate in the call via telephone, the dial-in number is (913) 312-6695. The dial-in password is 8295174. A copy of this press release will be furnished to the Securities and Exchange Commission on a current report on Form 8-K and will be posted to our website prior to the conference call.
A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in the attached tables.
Forward-Looking Statements
This news release contains certain forward-looking statements, including statements about our business prospects and outlook, anticipated increased demand for products, including our mobile products, expected industry-wide growth, expected growth in captive supply, expected technology transitions and the timing and cost benefits thereof, our planned investments in advanced technologies, products, markets and our brand, and scheduled appearances by our Chairman and CEO and our CFO that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others:

* slower than expected growth in market demand for our products including, for example, our solid state drives, or a slower adoption rate for our products in current and new markets that we are targeting including, for example, the mobile phone market,
* any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us,
* slower than expected expansion of our global sales channels,
* fluctuations in operating results, unexpected yield variances and delays related to our conversion to 56-nm NAND flash technology or the ramp-up of the 300mm flash fabrication facility,
* business interruption due to earthquakes, hurricanes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products,
* risks related to our acquisition of msystems, including that we may not realize the expected benefits of the acquisition due to integration challenges or that we may incur substantial costs or other damages associated with pending or future litigation related to the merger or costs or damages related to msystems’ prior stock option grant practices,
* adverse results in litigation affecting us,
* the risk that scheduled appearances by our executives could be cancelled or delayed by us or the network,
* other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and our Forms 10-Q.

Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.


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