SanDisk: Fiscal 1Q12 Financial Results

(in US$ million)	1Q11	1Q12
Revenues	1,294	1,206
*Growth*		-7%
Net income (loss)	224.1	114.4

SanDisk Corporation announced results for the first quarter ended April 1, 2012.

Total first quarter revenue of $1.21 billion declined 7% on a year-over-year basis and declined 24% on a sequential basis.

On a GAAP basis, first quarter net income was $114 million, or $0.46 per diluted share, compared to net income of $224 million, or $0.92, per diluted share in the first quarter of fiscal 2011 and $281 million, or $1.14 per diluted share, in the fourth quarter of fiscal 2011.

On a non-GAAP basis, first quarter net income was $156 million, or $0.63 per diluted share, compared to net income of $251 million, or $1.03 per diluted share, in the first quarter of fiscal 2011 and net income of $317 million, or $1.29 per diluted share, in the fourth quarter of fiscal 2011. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"Our first quarter results were adversely impacted by lower-than-expected pricing and demand weakness in certain segments and we expect similar trends in the second quarter as well," said Sanjay Mehrotra, president and CEO. "We believe a seasonally stronger demand environment in the second half of the year, combined with our diversifying portfolio of mobile and SSD solutions, will allow us to deliver strong sequential revenue growth in the third and fourth quarters."

Comments

Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"We now believe the industry experienced an imbalance between supply and demand in the first quarter, and we believe this imbalance is likely to continue through the second quarter of 2012. Industry demand has been weaker than we had expected, and we believe supplies have increased more than we had estimated at the beginning of the year. This led to greater-than-expected price decline, particularly in the second half of the first quarter, impacting our revenue and gross margin.
"For SanDisk, our first quarter results were impacted by two key factors: greater-than-expected price decline; and slower-than-expected demand for mobile cards from certain OEM customers with whom we have high shares.
"I will now comment on the second quarter. We expect the first quarter trends of industry supply-demand imbalance and weaker OEM card demand to continue in the second quarter as well. Further, we plan to reduce sales to the white label channels. An additional factor that is expected to impact our growth opportunity in the second quarter is our embedded business.
"In summary, we are disappointed with our first quarter results and our near-term prospects, which we believe will lead to a sequential decline in revenue in the second quarter.
"We expect SSD business to be approximately 10% of our 2012 revenue, and we are saying now that we expect it to be more than 10% of our business."

Judy Bruner, EVP of administration and CFO:
"Starting with revenue, our first quarter product revenue was 65% OEM and 35% retail. Retail revenue was down 30% sequentially and down 6% year-over-year, and OEM revenue was down 22% sequentially and down 10% year-over-year. Both our retail and OEM businesses were impacted by a sequential decline in petabyte demand and a steep price decline. In total, our petabytes sold declined 4% sequentially and grew 65% year-over-year. And our ASP per gigabyte declined 22% sequentially and 45% year-over-year.
"We expect the full year 2012 revenue will be down from our 2011 results.
"Given our lower revenue and margin expectations for 2012, we are lowering our expense forecast to $920 million on a non-GAAP basis for the year, down from the $975 million we shared in January.
"We do expect strong sequential growth in the revenue in Q3 and in Q4.
"And as we think about 2013, we believe that the industry bit supply growth for 2013 is likely to be in the 50% to 60% range."