SanDisk: Fiscal 2Q12 Financial Results

(in US$ million)	2Q11	2Q12	6 mo. 11	6 mo. 12
Revenues	1,375	1,032	2,669	2,238
*Growth*		-25%		*-17%*
Net income (loss)	248.4	13.0	472.5	127.4

SanDisk Corporationwww.sandisk.com announced results for the second quarter ended July 1, 2012.

Total second quarter revenue of $1.03 billion declined 25% on a year-over-year basis and declined 14% on a sequential basis.

On a GAAP basis, second quarter net income was $13 million, or $0.05 per diluted share, compared to net income of $248 million, or $1.02 per diluted share, in the second quarter of fiscal 2011 and $114 million, or $0.46 per diluted share, in the first quarter of fiscal 2012.

On a non-GAAP basis, second quarter net income was $51 million, or $0.21 per diluted share, compared to net income of $278 million, or $1.14 per diluted share, in the second quarter of fiscal 2011 and net income of $156 million, or $0.63 per diluted share, in the first quarter of fiscal 2012. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"We delivered second quarter results in line with our forecast, reflecting short-term weakness in our mobile OEM sales, strength in retail, especially in international markets, and growth in our enterprise and client SSD products," said Sanjay Mehrotra, president and CEO of SanDisk. "I am pleased to report that our SSD revenues achieved 10% of second quarter sales with growing adoption of our solutions by major OEMs. We also made good progress on our embedded product roadmap for mobile customers. We believe that strengthening industry fundamentals and our expanding portfolio of solutions will contribute to improving financial results in the second half of 2012."

Comments

Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"In the second quarter, as we discussed previously, the bundled card opportunity with handset OEMs continued to decline due to a combination of OEMs reducing their [indiscernible] costs and increasing their mix of embedded flash smartphones.
"From an information technology standpoint, our 19-nanometer transition accounted for about 1/2 of our production mix in the second quarter, with excellent [indiscernible] on both X2 and X3 technologies.
"Turning to industry base growth, we now forecast lower industry supply growth for both 2012 and 2013. This is the result of the industry slowdown in capacity growth, a continued slowdown in technology transition and a longer deal of technology nodes driven by OEM requirement. We now estimate industry base growth for 2012 to be in the 70% range.
"For 2013, we now estimate industry base growth to be in the 40% to 50% range, down from the 50% to 60% range estimated previously. As to SanDisk's capacity growth, we have not made any decision on further ramp of Phase 1 of Fab 5 and do not expect new SanDisk major capacity increase until sometime in 2013. We believe that flash demand growth fueled by smartphones, tablets and SSDs will outstrip this supply growth in 2013, supporting stronger industry fundamentals."

Judy Bruner, CFO:
"Starting with a review of second quarter revenue, our petabytes sold increased 5% sequentially and 52% year-over-year. And our ASP per gigabyte declined 18% sequentially and 52% year-over-year. The mix of our second quarter product revenue was 45% retail and 55% OEM, reflecting sequential growth in retail revenue of 10% and a sequential decline in OEM revenue of 28%. On a year-over-year basis, our retail revenue was up 1%, while our OEM revenue declined 39%.
"Our third quarter revenue forecast is $1.20 billion, plus or minus $50 million."