Tablets, Ultrabooks Key to Future Growth at SanDisk, CEO Says

The “tablet market shakeout” in Q3 contributed to sequential declines in average selling prices for flash memory at SanDisk, Chief Financial Officer Judy Bruner said on a quarterly earnings call. Gigabytes sold grew 18 percent for SanDisk in Q3, but ASP per gigabyte dropped 13 percent, a result of “a reduced mix of iNAND sales during the quarter due to consolidation in the tablet market” and an increased mix of OEM card sales, Bruner said.

NAND memory showed strong gains in the quarter, “despite a significant shakeout,” said CEO Sanjay Mehrotra. Having observed the rise of the tablet business, Mehrotra said “some of these devices may do well and some may not.” Aside from the iPad, the first generation of tablets “has not done as well in the marketplace,” he said. SanDisk continues to have “strong momentum” in design wins in tablets and realized 25 percent year-over-year revenue growth from retail and OEM mobile end markets combined, he said. As the second generation of tablets arrives on the market, the category remains “very large” for SanDisk, he said.

Solid-state drives (SSD) are on target to become 25 percent of SanDisk revenue in the next few years, Mehrotra said. The PC market for SSD drives will “take off in 2012 or 2013,” following “robust” progress on the enterprise side in Q3, he said. SanDisk enterprise SSDs have been qualified at three out of seven tier-one storage OEMs with multiple systems now shipping, and the company expects to complete qualifications with several more customers in the next few months, he said. Mehrotra touted SanDisk’s “differentiated products” that feature a proprietary, parallel architecture, utilizing the company’s third-generation ASIC controller and advanced firmware, which combine to deliver fast data transfer and processing speeds with minimal power consumption, he said.

In the PC market, the nascent Ultrabook category is driving demand for NAND flash, which can be designed in as either high-capacity solid-state drives or as lower capacity cache memory alongside high-capacity hard drives, Mehrotra noted. Ultrabook designs that call for instant-on capability and longer battery life, packaged in an “ultrathin form factor,” bode well for “significantly increased NAND flash consumption” in the PC market in the years ahead, he said. SanDisk has made early inroads into Ultrabooks with the recently announced SSD-only Asus UX21 and UX31 Ultrabooks (CED Oct 12 p2), along with “another Tier 1 OEM design win,” Mehrotra said. Several other projects with OEMs are also underway, he said.

Innovation will continue to spur demand for NAND flash, Mehrotra said, citing mobile devices including cellphones, tablets and e-readers. Tablets are becoming “indispensable” lifestyle devices and productivity tools, he said, and flash memory is playing a key role in high-end devices including the new Kindle Fire and high-end readers and tablets, he said. Mehrotra sees significant global expansion for tablets.

SanDisk’s net income in Q3 was $233 million, compared with $322 million in Q3 2010, the company said. Revenue for Q3 revenue was $1.416 billion, up 15 percent year over year, it said. SanDisk’s retail business grew year over year in Q3 primarily on growth in emerging markets, Mehrotra said. SanDisk saw a strong back-to-school sales season in North America, fueled by USB drives and memory cards, Mehrotra said. In addition to new 64-gigabyte SD and microSD memory cards, the company unveiled in Q3 the Memory Vault, a standalone storage product designed to preserve digital images.