SanDisk: Fiscal 1Q13 Financial Results

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Abstracts of the earnings call transcript:

Sanjay Mehrotra, president and CEO:
" (...) we expect to launch our next-generation SaaS and PCIe SSDs manufactured on our 19-nanometer technology in the second half of this year.
"Turning to manufacturing, our 19-nanometer technology remains the dominant production node in the first quarter and we anticipate continued high usage of 19-nanometer technology throughout 2013. We expect to begin initial production of 1Y nanometer technology late in the third quarter.
"Looking at supply bit growth estimates, we continue to believe that the 2013 industry supply bit growth rate will be in the range of 30% to 40% and that our captive supply bit growth will be meaningfully below that range. We expect a healthy demand-and-supply balance and a favorable pricing environment in 2013. We have decided not to add new wafer capacity in Phase I of Fab 5 during the remainder of 2013. Instead, concentrating our efforts on completing the remaining 19-nanometer transition, beginning the 1Y nanometer transition and making continued improvement in fab productivity.
"Given the increased manufacturing equipment requirements of 1Y, we expect to utilize the remainder of the clean room space in Phase I of Fab 5 to continue the 1Y transition in the 3 Yokkaichi fabs. We expect that the Phase I Fab 5 clean room will be approximately 75% full by the end of this year and ultimately will be completely filled by the equipment required for the Yokkaichi 1Y transition.
"We continue to make good progress in our 3-pronged memory technology strategy, which includes cleaner NAND scaling, 3D Bics NAND and 3D resistive RAM. As we consider future clean room space requirements, we will need additional space to complete the 1Y technology transition and to enable transitions to 1Z nanometer for Fab 3, Fab 4 and Phase I of Fab 5 and potentially for Bics NAND technology as well, once it is ready for manufacturing. While we have not made a final decision, we now expect to begin construction of the Fab 5 Phase II shell sometime in the second half of this year, with construction expected to take 7 quarters. Phase II of Fab 5 is not expected to contribute any meaningful incremental wafer capacity for SanDisk in 2014."

Judy Bruner , CFO:
"The key highlights of the quarter included our SSD product revenue, which grew over 200% on a year-over-year basis, and the continued strengthening of our global retail channels which produced year-over-year revenue growth of 34%.
"Our record first quarter revenue grew 11% year-over-year, with petabytes sold up 36% and ASP per gigabyte down 18% from Q1 last year. Sequentially, revenue was seasonally down 13% with petabytes sold down 16% and ASP per gigabyte up 2%, reflecting strong supply-demand balance and an improving product mix. This is the first time in our history that ASP per gigabyte has gone up sequentially for 2 quarters in a row.
"The commercial channel includes OEM customers, B2B customers, direct enterprise customers and licensees. Our total Q1 revenue was 62% commercial and 38% retail, reflecting a year-over-year mix shift toward retail of 6 percentage point driven by our strong growth in that channel.
"Our first quarter commercial revenue grew year-over-year by 1% to $829 million with product revenue up $2 million and license and royalty revenue up $3 million. Within commercial product revenue, SSDs produced the strongest growth and embedded sales grew 30% year-over-year. The growth from SSDs and embedded products was largely offset by a continued decline in OEM bundled card revenue as well as a shift away from white label OEM cards and wafers in order to prioritize memory supply for SSDs and embedded.
"Our first quarter retail revenue grew 34% year-over-year to $512 million with the highest dollar growth coming from mobile cards.
"The average capacity of our mobile retail cards in Q1 was over 11GB compared to less than 6GB for mobile cards in the commercial channel.
"Based on our decision to add no new wafer capacity beyond productivity improvements in 2013, we expect to be supply-constrained for the remainder of the year. We anticipate a very modest level of price decline in 2013 due to our expectation of continuing favorable supply-demand balance coupled with an increased year-over-year mix of SSD and embedded product sales, as well as high-performance retail product sales. We expect our second quarter revenue to be between $1.35 billion and $1.4 billion. This is the narrow range reflecting supply constraints and also a sequentially lower level of SSD revenue in the second quarter due to lumpiness in the timing of sales to certain customers. For the full year, we are raising our estimated revenue range to $5.6 billion to $5.75 billion."