SanDisk: Fiscal 3Q11 Financial Results

(in US$ millions)	3Q10	3Q11	9 mo. 10	9 mo. 11
Revenues	1,234	1,416	3,499	4,085
*Growth*		15%		*17%*
Net income (loss)	322.1	233.3	814.7	705.8

SanDisk Corporation announced results for the third fiscal quarter ending October 2, 2011.

Total third quarter revenue of $1.416 billion increased 15% on a year-over-year basis and increased 3% on a sequential basis.

Third quarter net income, in accordance with U.S. GAAP, was $233 million, or $0.96 per diluted share, compared to net income of $322 million, or $1.34 per diluted share in the third quarter of fiscal 2010 and $248 million, or $1.02 per diluted share, in the second quarter of fiscal 2011.

On a non-GAAP basis, which excludes the impact of share-based compensation expense, amortization of acquisition-related intangible assets, non-cash economic interest expense associated with the convertible debts and related tax adjustments, third-quarter net income was $292 million, or $1.20 per diluted share, compared to net income of $311 million, or $1.30 per diluted share, in the third quarter of fiscal 2010 and net income of $278 million, or $1.14 per diluted share, in the second quarter of fiscal 2011. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"We again delivered record revenue and strong profitability, driven by robust demand in our diversified end markets," said Sanjay Mehrotra, president and chief executive officer. "Our broad portfolio of innovative storage solutions positions us exceedingly well to capitalize on our numerous growth opportunities in smart mobile devices and consumer and enterprise computing platforms."

Cash flow from operations in the third quarter was $176 million and free cash flow was $189 million.

Total cash and cash equivalents and short and long-term marketable securities at the end of the third quarter of fiscal 2011 were $5.27 billion compared to $5.05 billion at the end of the third quarter of fiscal 2010 and $5.28 billion at the end of the second quarter of fiscal 2011.

Comments

Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"Our integration of Pliant Technology has gone exceedingly well. SanDisk enterprise SSDs have been qualified at 3 out of 7 Tier 1 storage OEMs with multiple systems now shipping.
"In manufacturing, our 24-nanometer technology continues to ramp and accounted for slightly more than 60% of our bit production in Q3. We are on track to ramp production of our 19-nanometer technology this quarter using both 2-bit-per-cell MLC as well as 3-bit-per-cell X3 memory, which we expect will sustain our cost leadership in 2012. Fab 5 ramp is going very well with yields at world-class levels, a significant achievement in the short time since the Fab 5 began production in July 2011. We expect to deliver approximately 75% captive supply bit growth this year.
"We expect the current capacity expansion commitment within Phase I of Fab 5 to be completed by the end of January 2012 and future Phase I expansion to begin approximately 3 months later."

Judy Bruner, CFO:
"Year-over-year, our gigabytes sold grew 87% and our ASP per gigabyte declined 37%. Sequentially, our gigabytes sold increased 18%.
"The mix of our product revenue in the third quarter was 65% OEM and 35% retail. Q3 retail revenue grew 11% sequentially and 8% year-over-year.
"Q3 OEM revenue was down 1% sequentially and up 21% year-over-year.
We expect continued demand growth and supply/demand balance in the fourth quarter. Our revenue forecast for the fourth quarter is $1.5 billion to $1.6 billion."