Revenues increase 45% Year over Year and Operating Margin at 21%
SUNNYVALE, CA, October 13, 2004 - SanDisk Corporation (NASDAQ:SNDK), the world's largest supplier of flash storage card products, today announced results for the third quarter ended September 26, 2004. Third quarter total revenues increased 45% to $408 million compared to the third quarter of 2003 and decreased 6% from the second quarter of 2004. Third quarter net income was $54 million, compared to $15 million* and $71 million for the third quarter of 2003 and the second quarter of 2004, respectively. Earnings per share were $0.29 per diluted share compared with $0.09 * per diluted share in the same quarter of 2003 and $0.38 per diluted share in the second quarter of 2004.
"Industry wide supply of NAND flash memory increased at a faster rate than the increase in demand during the summer months. Although we sold a record numbers of units and megabytes, we experienced a steeper than expected average price per megabyte decline of 22% compared to the second quarter. This resulted in third quarter revenues 6% below the second quarter and product margins approximately 6 points below the second quarter and 1 point below the low end of our guidance at the beginning of the quarter. Despite aggressive price declines, we were able to generate 21% operating margins and $129 million in cash from operations for the quarter," said Eli Harari, President and CEO of SanDisk Corporation.
"During the third quarter we introduced an array of exciting new products that are starting to ship this holiday season, including the worlds fastest flash cards - our new line of SanDisk Extreme III TM cards, and a new line of flash digital music players that we introduced yesterday and which we expect to become a major new product category for us. We continue to make steady inroads into mobile phones, and are shipping flash card bundles to Motorola, Sony Ericsson, Samsung Mobile, NEC and Siemens, among others. In the third quarter we shipped more than 1 million TransFlash TM modules, and we currently expect seven leading handset OEMs to introduce more than 40 handset models using TransFlash TM in 2005, " Harari added.
"We are optimistic about global demand for our products in the traditionally strong fourth quarter. We have a front row seat in what we believe are some of the fastest growing markets in consumer electronics, mobile handsets, USB Flashdrives and digital music players. In the fourth quarter we expect to break for the first time the 10 cents per megabyte price point at the consumer level for our 512 megabyte and gigabyte capacity cards. This is one tenth of the price of flash cards just three years ago and represents a major milestone for flash storage, which we believe will accelerate the wide-scale adoption of our flash cards in numerous mobile and consumer applications. We expect to achieve this price point while maintaining our profitability through significant reductions in our captive production costs in the fourth quarter as we ramp up production of our newest, leading edge 90 nanometer NAND/MLC 4 gigabit Flash memory chips, which deliver significantly lower cost per megabyte than our current .13 micron production technology. With proper execution, we believe we are well positioned to exceed the $500 million quarterly revenue mark for the first time in the fourth quarter," said Harari.
Additional Third Quarter Financial Results and Highlights
Conference Call and Guidance
SanDisk third quarter 2004 conference call with guidance is scheduled for 2:00 p.m. Pacific Time, Wednesday, October 13 2004. Todays teleconference prepared remarks, including fourth quarter guidance, will be posted to http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=sndk&script=2100. The conference call will be web cast by CCBN and can be accessed live, and throughout the quarter, at SanDisks website at and at www.streetevents.com for registered streetevents.com users. To participate in the call via telephone, the dial in number is (800) 811-7286 or (913) 981-4902 for international callers. The call will also be available by telephone replay through Sunday, October 17, 2004, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering the pass code 861151. A copy of this press release will be filed with the Securities and Exchange Commission on a current report on Form 8-K and will be posted to our website prior to the conference call.
SanDisk Corporation President and CEO, Eli Harari, is scheduled to appear on CNBCs "Closing Bell With Maria Bartiromo" today, Wednesday, October 13, 2004 at approximately 4:20 p.m. Eastern Time to discuss the companys expanding product lines and growth prospects.
This news release contains certain forward-looking statements, including our business outlook, expectations for new product introductions and new customers, future revenues, average selling prices, gross margins, operating expenses, capital equipment expenditures and tax rates that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others: market demand for our products may grow more slowly than our expectations or a slower adoption rate for these products in new markets that we are targeting, fluctuations in operating results, unexpected yield variances and longer than expected low yields and other possible delays related to our conversion to 90-nanometer NAND flash technology, any interruption of or delay in supply from any of the semiconductor manufacturing facilities that supply products to us, our inability to make additional planned smaller geometry conversions in a timely manner, future average selling price erosion that may be more severe than our expectations due to possible excess industry capacity of flash memory either from existing suppliers or from new competitors, price increases from non-captive flash memory sources and third-party subcontractors, higher than expected operating expenses, higher than anticipated capital, adverse global economic and geo-political conditions, including adverse currency exchange rates and acts of terror, the timely development, internal qualification and customer acceptance of new products that are based on the 90-nanometer and 70-nanometer NAND technologies, fluctuations in license and royalty revenues, higher than anticipated tax rates, regulatory duties or fees, business interruption due to earthquakes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products, further impairment of our investments in Tower Semiconductor Ltd. due to any decline in stock valuations, and the other risks detailed from time-to-time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10-K for the year ended December 28, 2003 and our quarterly reports on Form 10-Q. Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.
SanDisk Corporation, the worlds largest supplier of flash storage card products, designs, manufactures and markets industry-standard, solid-state data, digital imaging and audio storage products using its patented, high-density flash memory and controller technology. SanDisk is based in Sunnyvale, CA.
*Includes a net loss on unauthorized sales of UMC shares of $36 million.
SanDisk and SanDisk Ultra are trademarks of SanDisk Corporation, registered in the United States and other countries. SanDisk Extreme and TransFlash are trademarks of SanDisk Corporation. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holders.