SanDisk: Fiscal 1Q09 Financial Results

SanDisk Corporation announced results for the first quarter ended March 29, 2009. Total revenue of $659 million declined 22% on a year-over-year basis. Net loss, in accordance with U.S. Generally Accepted Accounting Principles (GAAP), was ($208) million, or ($0.92) per share, compared to GAAP net income of $11 million or $0.05 per share in the first quarter of 2008.

Non-GAAP net loss was ($108) million, or ($0.48) per share, compared to non-GAAP net profit of $48 million, or $0.21 per share, in the first quarter of 2008. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“Industry fundamentals improved in the first quarter. We are encouraged that industry supply and demand balance is becoming better aligned, resulting in higher flash pricing. Our financial results improved substantially from the prior quarter driven by better than expected demand, strong product cost reductions and lower operating expenses,” said Eli Harari, Chairman and CEO, SanDisk. “We completed the previously announced restructuring of the Manufacturing Joint Ventures with Toshiba, which substantially improves our financial position by bringing in cash and reducing our equipment lease obligations. Our outlook is cautiously optimistic for continued improvement in the second quarter.”

FIRST QUARTER 2009 METRICS AND HIGHLIGHTS

• Total cash and equivalents, short-term investments and long-term investments at the end of the first quarter was $2.38 billion compared to $2.54 billion at the end of the fourth quarter of 2008.
• SanDisk completed the restructuring of the Manufacturing Joint Ventures with Toshiba for a total value of 79.3 billion Japanese yen, which included cash proceeds valued in United States dollars at approximately $277 million and the remainder in the form of the transfer of equipment lease obligations to Toshiba.
• Off-balance sheet equipment lease obligations were reduced to $1.23 billion at the end of the first quarter of 2009 compared to $2.09 billion at the end of the fourth quarter of 2008.
• Product revenue was $588 million, down 19% year-over-year and down 21% sequentially.
• License and royalty revenue of $71 million, was down 43% year-over-year and down 41% sequentially.
• Total megabytes sold increased 166% year-over-year and 9% sequentially.
• Average price per megabyte sold declined 69% on a year-over-year basis and 27% sequentially.
• Average retail card capacity was 4.34 gigabytes, an increase of 111% on a year-over-year basis and 15% sequentially.
• GAAP product gross loss was ($73) million compared to GAAP product gross profit of $133 million in the first quarter of 2008 and GAAP product gross loss of ($462) million in the fourth quarter of 2008.
• Non-GAAP product gross loss was ($67) million compared to non-GAAP product gross profit of $151 million in the first quarter of 2008 and non-GAAP product gross loss of ($449) million in the fourth quarter of 2008.

OTHER RECENT ANNOUNCEMENTS

• SanDisk announced the SanDisk Service Delivery Card (SDC), a high capacity custom memory solution based on a microSD card and designed specifically for the Mobile Network Operator (MNO). The unique capabilities of the SanDisk Service Delivery Card enable MNOs to configure local storage to streamline data delivery, improve high capacity memory performance and integrate with network applications and services to enhance the user experience.
• SanDisk announced its 64-gigabit memory, the industry’s highest capacity monolithic chip manufactured on the world’s first high-performance 4-bits per cell flash memory architecture.
• SanDisk and Toshiba Corporation announced the co-development of the industry’s smallest 32-gigabit monolithic memory chip featuring 3-bits per cell flash memory architecture using 32-nanometer process technology.
• SanDisk won the Lewis Winner Outstanding Paper Award at the 2009 IEEE International Solid State Circuits Conference (ISSCC), held in San Francisco. The award was made for the paper entitled, A 16Gb 3b/Cell NAND Flash Memory in 56nm with 8MB/s Write Rate, presented at the 2008 ISSCC. The paper detailed key advancements leading to the development of 3-bits per cell memory on 56-nanometer technology.
• SanDisk began selling its Sansa slotRadio player and card online at slotRadio.org. Designed especially for the casual music listener, the new player is a stylish, portable music device that comes bundled with 1,000 songs preloaded onto a microSD card, which have been arranged into a variety of genre-themed playlists.