SanDisk Corporation (NASDAQ:SNDK) is a global leader in flash-memory storage solutions. It designs, develops, and manufactures flash-memory cards that are used in various electronic products. SanDisk’s flash-memory products include solid-state device (SSD), memory cards for smartphones and cameras and flash products used in electronic devices including tablets, laptops, and computing platforms.
Fundamentals
In the first quarter of 2013, SanDisk Corporation (NASDAQ:SNDK) revenues grew by 11.21% year over year, to $1.34 billion and declined 13.02% quarter over quarter. The company reported a net income of $166 million, a decline of 22.16% from $213.54 sequentially. For the next quarter, ending in June, analysts expect revenue of $1.39 billion. SanDisk’s healthy sales of SSD products drive performance and contributed 20% to total sales. The company gained share in the SSD market, which will drive future growth. Not only is the company’s EPS showing consistent growth, its price-to-earnings (P/E) and operating margin are also higher than industry average.
SanDisk Corporation (NASDAQ:SNDK) has increased its SSD market share through its acquisition of Pliant Technology. Due to a strong relationship with industry leaders such as Teradata Corporation (NYSE:TDC) and Dell Inc. (NASDAQ:DELL), the SSD division will be a key driver for future growth.
The increased growth of cloud storage will also have a major impact on SanDisk’s SSD segments. There is a shift from PCs to handheld devices which can have twofold impact manufacturers of SSD. The increased sales of handhelds will increase SSD demand. Moreover, these devices rely on cloud storage and SSD are an essential component of tired storage structures.
Oversupply
Due to an increase in players, the NAND industry is currently facing an oversupply and price competition. This price competition has severely impacted industry-wide margins. SanDisk Corporation (NASDAQ:SNDK) has recently reduced its NAND flash price and so have competitors. For this year, SanDisk’s management raised its estimated revenue for the year ended 2013, because it expects prices to stabilize. Growing demand of Smartphones and tablets will help to drive the demand for NAND flash and also increase prices.
SanDisk Corporation (NASDAQ:SNDK) is a key supplier to Apple, which is a key global purchaser of NAND chips. Last quarter, Apple accounted for 13% of SanDisk’s business. A further rise in iPhone demand will boost Apple’s demand for NAND flash chips. About 45 million iPhones have been sold in the last quarter of 2012. Analysts estimate that Apple’s share in the mobile market will grow from 7% in 2012 to 15% in 2019. The company is all set to launch the next iteration of iPhone and maybe even a cheaper iPhone. The street is expecting Apple to make the launch in the fall.
In the SSD industry, SanDisk has a number of competitors, but Micron Technology, Inc. (NASDAQ:MU) and Seagate Technology PLC (NASDAQ:STX) are the key competitors of SanDisk. Western Digital and Seagate Technology PLC (NASDAQ:STX) are manufacturing hybrid devices, which can be used alternatively to hard-disk drives (HDD) and solid-state drives (SSD). These devices also deliver high speed and more storage capacity. This could increase competition for SanDisk and threaten the ambitions of the company to target cloud storage.
