SanDisk: Fiscal 2Q15 Financial Results

Comments

SanDisk reported once again a poor quarter en 2Q15. Revenue decreased 24% Y/Y and 7% Q/Q, net income down 52% Y/Y but 108% Q/Q. But business is supposed be better next three-month period.

CFO Judy Bruner explains the reasons of the bad quarterly results:

• "Our client SSD revenue declined as expected, due to the end of life during Q1 of a program with a major customer (probably Apple. Editor), while our client SSD revenue with other OEM customers increased nicely from Q1 to Q2.
• "Our enterprise revenue also declined sequentially. Embedded revenue was down sequentially in Q2, due to the seasonality of certain embedded products, while our removable revenue increased sequentially driven by seasonality and share gains.
• "Our gigabytes sold were down sequentially by 1% and down year over year by 6%, with the year-over-year decline driven largely by rebuilding of our inventory levels, combined with the loss of the client SSD program at a major customer.
• "The decline in our blended ASP per gigabyte was more modest than in Q1, with a sequential decline of 6% and a year-over-year decline of 21%. Our all-in cost per gigabyte declined 4% sequentially and declined 10% year over year."

Furthermore, there is a decline in unit prices of 128GB and 256GB SSDs, but with the advantage to continue to reduce the gap with HDDs, with the 128GB drive approaching cost parity with low-capacity HDDs.

Nevertheless, president and CEO Sanjay Mehrotra, has some positive comments:

• "In enterprise SSDs, our Fusion-io revenue grew sequentially in Q2.
• "Our enterprise SAS SSDs sales performed well during the quarter, driven by better-than-expected demand for several of our products."

Future products
SanDisk plans to begin addressing the NVMe PCIe market opportunity with a new offering available for qualification in mid-2016. Furthermore, it expects to start sampling products based on next-generation 3D NAND memories in 2017. The company began equipment purchases to support the commencement of pilot production of 48-layer architecture in the second half of 2015.

Outlook
From a supply bit growth rate standpoint, the flash maker expects the industry's year-over-year supply bit growth to be somewhat above its previous estimate of approximately 40%, and also expects its captive bit growth to be in line with the industry. For 2016, the firm estimates is that both the industry and its own supply bit growth rates will be lower than in 2015.

For the third quarter, SanDisk expects revenue to be higher than in 2Q15, in the range of $1.35 billion to $1.45 billion or a sequential growth between 9% and 17%.

The firm expects the majority of sequential second-half revenue growth to come from mobile embedded products, with a significant portion of this revenue forecasted on the cusp between 3Q15 and 4Q15. The ramp timing of several mobile embedded products, along with the market success of company's customers' mobile products, are key variables in where SanDisk land in forecasted 2015 revenue range.

Current estimate for 2015 revenue remains within the range of $5.4 billion to $5.7 billion that the company provided last April, which means a huge decline from FY14: 14% to 19%.

Quarterly Metrics

Revenue Mix by Category

(1) Revenue by category is estimated based on analysis of the information
the company collects in its sales reporting processes.
(2) Embedded includes products that attach to a host system board.
(3) Removable includes products such as cards, USB flash drives and audio/video players.
(4) Client SSD Solutions includes SSDs used in client devices and associated software.
(5) Enterprise Solutions includes SSDs, system solutions
and software used in data center applications.
(6) Other includes wafers, components, accessories and license and royalty.

To read the earnings call transcript