SanDisk: Fiscal 4Q12 Financial Results

(in US$ million)	4Q11	4Q12	FY11	FY12
Revenues	1,577	1,541	5,662	5,053
*Growth*		-2%		*-11%*
Net income (loss)	281.2	213.5	986.9	417.4

SanDisk Corporation announced results for the fourth quarter and fiscal year ended December 30, 2012.

Total fourth quarter revenue of $1.54 billion decreased 2% on a year-over-year basis and increased 21% on a sequential basis. Total revenue for fiscal 2012 of $5.05 billion decreased 11% from $5.66 billion in fiscal 2011.

On a GAAP basis, fourth quarter net income was $214 million, or $0.87 per diluted share, compared to net income of $281 million, or $1.14 per diluted share, in the fourth quarter of fiscal 2011 and $77 million, or $0.31 per diluted share, in the third quarter of fiscal 2012. Net income for fiscal 2012 was $417 million, or $1.70 per diluted share compared to $987 million, or $4.04 per diluted share in fiscal 2011.

On a non-GAAP basis, fourth quarter net income was $257 million, or $1.05 per diluted share, compared to net income of $317 million, or $1.29 per diluted share, in the fourth quarter of fiscal 2011 and net income of $118 million, or $0.48 per diluted share, in the third quarter of fiscal 2012. Net income for fiscal 2012 was $582 million, or $2.38 per diluted share compared to $1.14 billion, or $4.65 per diluted share in fiscal 2011. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"SanDisk ended 2012 with strong momentum in our SSD business, which contributed 10% of our Q4 revenue. We are now supplying client SSDs to ten leading PC OEMs and our enterprise SSDs are qualified at a fourth storage OEM," said Sanjay Mehrotra, president and CEO of SanDisk. "We drove solid sequential growth in our embedded mobile products and continued to execute well in our retail business. We believe that our broadening customer engagements and expanding product portfolio position us well for strong profitability in 2013."

At the end of the fourth quarter, SanDisk’s cash and short and long-term marketable investments totaled $5.71 billion.

Comments

Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
"From a technology standpoint, we executed well on our 19-nanometer transition, and this provides us with an industry-leading flash cost structure.
"Combined with a very strong revenue increase in the customized embedded solution, our overall embedded sales set a record, growing 45% sequentially, accounting for about 1/3 of our total revenue.
"On a year-over-year basis, our full-year SSD sales almost tripled and represented 9% of our 2012 revenue. We expect to grow our SSD revenue sequentially in Q1 2013 both in dollar terms and as a percentage of our overall revenue and we remain on track to drive 25% of our company revenue from SSDs in 2014.
"We also began revenue shipments of a new Client SSD to an additional major OEM customer and SanDisk now supplies Client SSDs to 10 leading PC OEMs.
"In 2013, industry supply growth is estimated to be in the 30% to 40% range, and we expect a healthy demand and supply balance and a significantly improved pricing environment. We continue to take a prudent approach to managing wafer capacity expansion in our fabs. We expect continued improvements in fab productivity, providing increases in wafer output during 2013, allowing us to defer the addition of new wafer capacity. We have not yet made a decision about adding new capacity and we are still evaluating the timing and extent of any new capacity addition in 2013."

Judy Bruner, CFO:
"Our fourth quarter bits sold increased 13% sequentially and 56% year-over-year, bringing the full year 2012 revenue bit growth to 62%. Our ASP per gigabyte increased 7% sequentially, driven by an increased mix of mobile embedded and SSD sales as well as a strong supply-demand balance within our business. Our fourth quarter ASP per gigabyte represented a year-over-year decline of 37%, and our full-year average price was 45% lower than in 2011.
"The mix of our product revenue was 61% OEM and 39% retail for both the fourth quarter and the full year.
"Our fourth quarter bits sold increased 13% sequentially and 56% year-over-year, bringing the full year 2012 revenue bit growth to 62%. Our ASP per gigabyte increased 7% sequentially, driven by an increased mix of mobile embedded and SSD sales as well as a strong supply-demand balance within our business. Our fourth quarter ASP per gigabyte represented a year-over-year decline of 37%, and our full-year average price was 45% lower than in 2011.
"In the retail channel, our fourth quarter revenue grew 15% sequentially and 3% year-over-year.
"Within our imaging revenue, the mix shift to higher performance cards has been a positive for gross margin. Our fourth quarter OEM sales grew 27% sequentially and were down 5% year-over-year.
"We expect our 2013 supply growth to reflect minimal growth in wafer capacity, a 1Y transition beginning in the second half and a year-over-year increase in our mix of X2 memory. This will lead to a much lower level of bit growth in 2013 than we experienced in 2012. At the same time, we anticipate a favorable industry supply-demand environment to result in a more moderate rate of industry price decline than in 2012, and we expect our improving product mix to further moderate our price decline. Overall, our estimate for 2013 revenue is $5.3 billion to $5.6 billion. We expect to experience typical seasonality with a soft first quarter and a strong fourth quarter, and our first quarter revenue estimate is $1.225 billion to $1.3 billion."