Into the numbers
SanDisk Corporation (NASDAQ:SNDK) reported revenue of $1.48 billion, a 43% juup from the prior-year quarter’s $1.03 billion and $80 million better than the analysts’ estimates of $1.40 billion. The company crushed the earnings estimate of $0.93 per share by reporting its second quarter EPS at $1.21 a share, compared to $0.21 per share in the same period last year, and $0.84 per share sequentially. SanDisk robust growth in gross margins from 28.3% last year to 46.7% in the last reported quarter was the driving factor of the company’s stellar profitability.
In the past, as the demand for NAND flash was mounting swiftly with growing smartphones sales, so was the supply which created a downward pressure on SanDisk Corporation (NASDAQ:SNDK)’s profitability over the last year. However, there is stark improvement in the NAND flash industry pricing because of simple economics, as supply is reducing compared to demand. The supply is comparatively short, as many NAND flash manufacturers have reduced their capital expenditures in the past few months helping NAND flash prices to stabilize.
The results are already evident as SanDisk reported a sequential price increase of 2% in the first quarter on top of a 7% price increase in the fourth quarter last year. Going forward, as the company keeps its supply under check it will be yielding better gross margins in the current quarter due to better pricing.
SanDisk Corporation (NASDAQ:SNDK)’s margins have further improved as sales of high margin carrying embedded products and solid-state drives, or SSDs, have been strong. The company’s SSD sales contribute approximately 20% of the company’s revenue and are expected to continue rapidly as SSDs are taking over conventional hard drives as the principal form of storage in laptops and other enterprise servers.
SanDisk’s enterprise SSD demand is growing quickly because of the shift towards the cloud. Presently, SSDs prove to be the best options for cloud servers, as they need fast hard drives to situate customer data swiftly. SanDisk Corporation (NASDAQ:SNDK) currently supplies SSDs to the 10 foremost PC OEMs, and these partnerships will only benefit the company in the future. It has recently announced that it will be acquiring SMART Storage Systems, to further improve its enterprise SSD portfolio.
Selling flash memory cards along with embedded memory for smartphones and tablets is also a huge revenue generating business for SanDisk Corporation (NASDAQ:SNDK). In its last conference call, management stated that over 900 million smartphones and 200 million tablets are expected to be shipped this year. Further, there is tremendous growth opportunity if the China mobile makers come up with smartphones. Being a part of a growing business is only going to prove more advantageous for the company in the future.
Competition
Micron Technology, Inc. (NASDAQ:MU) is also a major player among memory manufacturers. The company has a well diversified portfolio of memory products, ranging from DRAM, NAND flash memories and NOR flashes technologies. It is a market leader in DRAM and NAND manufacturing process and is expected to acquire the Japanese company Elpida Memory. This acquisition would condense the supply of DRAM, giving Micron Technology better control over its pricing.
