SanDisk: Fiscal 4Q07 Financial Results

SanDisk Corporation announced results for the fourth quarter ended December 30, 2007. Fourth-quarter revenue of $1.246 billion increased 7% on a year-over-year basis and 20% on a sequential basis. Fourth-quarter net income, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was $106 million, or $0.45 per diluted share, compared to a GAAP net loss of $35 million, or $0.17 per diluted share, in the fourth quarter of 2006 that included a write-off of acquired in-process technology.

Total revenue for fiscal 2007 of $3.896 billion increased 20% from $3.258 billion in 2006. Net income for fiscal 2007 was $218 million, or $0.93 per diluted share, compared to net income of $199 million, or $0.96 per diluted share that included write-offs of acquired in-process technology in fiscal 2006.

Excluding the impact of acquisition-related charges, share-based compensation expense and the related tax effect, fourth quarter non-GAAP net income increased to $162 million, or $0.69 per diluted share, compared to third quarter 2007 non-GAAP net income of $130 million, or $0.54 per diluted share. Non-GAAP net income was $192 million, or $0.87 per diluted share, in the fourth quarter of 2006. On the same non-GAAP basis, total fiscal 2007 non-GAAP net income was $408 million, or $1.73 per diluted share, compared to $523 million, or $2.51 per diluted share in fiscal 2006. (+20%)

"This was a good quarter for SanDisk considering the challenging business conditions in our markets. We continued to see strong growth in our mobile business where we sold a record 51 million units and our diversified and differentiated product portfolio delivered sequential growth in product gross margin," said Eli Harari, Chairman and CEO. "Despite current uncertainties in the worldwide economy and a challenging industry pricing environment in the first quarter, we expect to grow our top and bottom line in 2008, driven by continuing strength in our mobile markets, our expanding international retail footprint and our competitive cost structure."

Key Metrics and Highlights for Fourth Quarter of 2007

* Product revenue was a record $1.118 billion, up 4% year-over-year and 22% sequentially.
* License and royalty revenue was a record $128 million, up 51% year-over-year and 8% sequentially.
* Total megabytes sold increased 146% year-over-year and 37% sequentially.
* Average price per megabyte sold declined 58% on a year-over-year basis and 11% sequentially.
* Average retail card capacity of 1816 megabytes was an increase of 63% on a year-over-year basis and 12% sequentially.
* For fiscal 2007 total megabytes sold increased 190% and average price per megabyte sold declined 60%.
* GAAP product gross margin was 28.1% compared to 30.7% in the fourth quarter of 2006 and 24.3% in the third quarter of 2007.
* Non-GAAP product gross margin was 29.7% compared to 32.3% in the fourth quarter of 2006 and 26.4% in the third quarter of 2007.
* GAAP operating income was $173 million compared to $12 million in the fourth quarter of 2006 and $109 million in the third quarter of 2007.
* Non-GAAP operating income was $223 million, or 18% of revenue, compared to $248 million, or 21% of revenue, in the fourth quarter of 2006 and $162 million, or 16% of revenue, in the third quarter of 2007.
* SanDisk announced Cruzer® Titanium Plus, a USB flash drive with automatic online file backup.
* SanDisk unveiled VaulterTM, a solid-state storage solution that works in conjunction with a PC’s hard drive to store and launch the computer’s operating system and software applications.
* SanDisk launched Video HD cards to provide consumers with high-definition, fast speed storage in the growing flash-based digital camcorder market.
* SanDisk filed patent infringement actions against 25 companies that manufacture, sell and import various removable flash storage products. Since filing these actions, 8 companies have signed patent cross license agreements with SanDisk.
* SanDisk repurchased 7.5 million shares during 2007 under a previously announced $300 million share repurchase plan to reduce the level of stockholder dilution caused by issuance of employee equity incentive awards.

SanDisk Corporation