Flash storage device maker SanDisk Corporation (NASDAQ:SNDK) released its second quarter results recently, and to the surprise of many, the results were staggering as the company substantially beat the consensus estimates. Taking a look at the statistics may knock your socks off, but the innovations and implementations that enabled it to post such a massive profit will leave you amazed.
Let us take a look at the factors that lifted SanDisk Corporation (NASDAQ:SNDK)’s margins to a new high.
Surpassing the expectations
There was a remarkable jump of 43% in SanDisk Corporation (NASDAQ:SNDK)’s revenue as the company generated $1.48 billion, which comfortably beat the analysts’ estimate of $1.39 billion. The rich products portfolio enabled SanDisk to surpass all expectations. Commercial consumers contributed towards 65% of the company’s revenue, while the remaining 35% was generated from retail.
This extraordinary augmentation of the revenue was primarily driven by the ever expanding demand of the company’s products. Apart from that, the strengthened price of the company’s microSD cards also favorably impacted the results.
If you’re still not awed by the statistics, a look at the company’s net income will certainly leave you impressed. SanDisk Corporation (NASDAQ:SNDK)’s net profit increased exponentially from $13 million to $352 million as the earnings per share amplified from $0.05 to $1.21 per share, comprehensively hammering the analysts’ estimate of $0.90 per share.
Barring a few flagship models of various companies and iOS devices, most of the smart devices and feature phones have provision for expanding storage beyond the embedded capacity, which also is responsible for continued increase in the sales of SanDisk Corporation (NASDAQ:SNDK)’s microSD cards. This significantly contributed towards this massive growth.
The escalating demand of highly efficient solid –state drives, or SSDs, resonated with the company’s plans, and out of all its competitors, SanDisk Corporation (NASDAQ:SNDK) benefited the most from this trend.
A peep into future prospects
If you’re thinking that the company may have maxed out its profits, then you’re in for surprise. Riding on its current wave of success, SanDisk Corporation (NASDAQ:SNDK) is trying to consolidate its position in the market. Let us take a look at the scenarios that may add to the current success.
It is estimated that over a billion smartphones and tablets will be shipped in the present fiscal year and the greater part of these devices will give the end consumer an option to expand storage beyond the embedded capacity, which will increase the demand of SanDisk Corporation (NASDAQ:SNDK)’s microSD card. This will undoubtedly help the company to match, if not exceed, the previous quarter margins as it will try to maintain a healthy demand-supply ratio.
Landing a spot in iPhone 5
The use of SanDisk Corporation (NASDAQ:SNDK)’s flash memory in Apple Inc. (NASDAQ:AAPL)’s iPhone 5 contributed to an upsurge in the company’s margins. The ever growing appeal of Apple’s products, especially in the U.S.A., led to the increase in demand of the company’s flash memory.
But that’s not it, there’s more in store. Apple Inc. (NASDAQ:AAPL) is planning to release a more economical version of the iPhone, which will benefit its sales as the company is trying to tackle the tight economic conditions and the increase in sales will be complemented by an increased necessity of SanDisk Corporation (NASDAQ:SNDK)’s flash drives. SanDisk’s plan of developing on the back of expected success of a cheaper iPhones is looking likely to be a success.
Investing in SanDisk Corporation (NASDAQ:SNDK) should boost your portfolio but, if you’re still not convinced, let me give you another good reason to buy this stock.
Innovations in SSDs
With the initial success of the newly released SSD called “SanDisk Corporation (NASDAQ:SNDK) Extreme II SSD,” the company is innovating its way to success by planning to introduce new SSDs, which will complement the needs of its customers. Over the previous conference call, Sanjay Mehrotra, Chief Executive Officer and president of the company mentioned that the recent acquisition of SMART Storage Systems will benefit it, as the former was an innovative SATA and SAD SDDs supplier.
Apart from that, SanDisk Corporation (NASDAQ:SNDK) has also developed an SSD using its 19-nano-meter technology and its shipments to the clients are on track.
Since the SSDs and other embedded products generate higher revenue and the demand for these products is always increasing, I expect the company to perform even better in the future.
Test of its resilience
In my opinion, there is no company capable of lucratively challenging SanDisk Corporation (NASDAQ:SNDK) on all fronts. But one competitor that may slightly dent its hope of building on its current triumph is Sony Corporation (ADR) (NYSE:SNE).
The collective sales increased 5% compared to the prior year to $68 billion, but let’s focus only on the mobile products of Sony Corporation (ADR) (NYSE:SNE) as it’s the only segment, which can potentially reduce SanDisk’s margins.