SanDisk revenue forecast exceeds estimates

SAN FRANCISCO Fri Jan 28, 2011 5:25am IST

An employee of a computer shop poses with a SanDisk compact flash memory card inside a computer mall in Taipei September 17, 2008.  REUTERS/Nicky Loh/Files

An employee of a computer shop poses with a SanDisk compact flash memory card inside a computer mall in Taipei September 17, 2008.

Credit: Reuters/Nicky Loh/Files

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SAN FRANCISCO (Reuters) - SanDisk Corp offered a forecast for the current quarter and 2011 above Wall Street's expectations, in a sign the flash memory supplier continues to benefit from strong demand for mobile devices.

Shares fell 3 percent after SanDisk reported fourth-quarter margins that were short of expectations, but they rebounded to rise 1 percent when the company issued its forecast on a conference call with analysts.

SanDisk's shares have risen 70 percent over the past year as the company and its rivals have benefited from relative price stability in the flash market.

NAND flash is a commodity, and SanDisk's fortunes are in large part determined by the supply-demand balance in the global market and its impact on pricing.

"We feel good about the supply-demand balance for 2011. Our expectation is that the industry will be in balance," Chief Financial Officer Judy Bruner said in an interview.

SanDisk, which has a reputation for issuing conservative forecasts, said it expects revenue of $1.2 billion to $1.275 billion for the current quarter, versus Wall Street's estimate of $1.16 billion.

For 2011, the company forecast revenue of $5.3 billion to $5.7 billion, ahead of the $5.29 billion expected by analysts.

Demand for flash memory is widely expected to surge in the coming years, fueled by the rise of devices like smartphones and tablets like Apple's iPad.

SanDisk is the No. 1 supplier of flash memory cards sold to consumers at retail. But two-thirds of the company's sales now come from manufacturers that embed flash in their devices.

Research group iSuppli expects overall NAND flash revenue to surge 18 percent this year to $22 billion, following a 38 percent rise in 2010.

MARGINS DISAPPOINT

SanDisk reported higher-than-expected profit and revenue for the fourth quarter, on strong demand at retail and in Asia.

But adjusted gross margin came in at 43.7 percent, versus Wall Street's estimate of 45.2 percent.

Caris & Co analyst Craig Ellis said pricing declines were steeper than expected, causing margins to miss.

Average price per gigabyte sold in the fourth quarter declined 15 percent from the previous quarter.

SanDisk reported net income for the fourth quarter, ended Jan. 2, of $485.5 million, or $2.01 a share, up from $339.5 million, or $1.45 cents a share, in the year-ago period.

Excluding items, SanDisk earned $1.27 a share, above the average Wall Street estimate of $1.09 a share, according to Thomson Reuters I/B/E/S.

Revenue rose 7 percent to $1.33 billion, compared with Wall Street's estimate of $1.31 billion.

Shares of Milpitas, California-based SanDisk closed at $51.32 on the Nasdaq and rose to $51.80 in after-hours trading.

(Reporting by Gabriel Madway; Editing by Steve Orlofsky)

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