SanDisk 2004 Annual Report Download - page 9

Table of Contents
Our Sales Channels. Our products are available to end−users at over 100,000 retail storefronts around the globe and as data
storage cards bundled with host products by our OEM customers. We market our products under the SanDisk brand in the retail
channel using a direct sales organization, distributors and manufacturers’ representatives. We also sell products to OEM customers on
a private label basis. Our sales efforts are organized as follows:
• Retail. We ship SanDisk brand name products directly to consumer electronics stores, office superstores, photo retailers, mobile
phone stores, mass merchants, catalog and mail order companies, internet and e−commerce retailers, drug stores, supermarkets
and convenience stores and selected retail distributors. Sales to retailers often involve complex selling arrangements, see
“Item 7−Management’s Discussion and Analysis of Results of Operations and Financial Condition−Overview.”
We support our retail sales channels with both direct and indirect sales representatives. We have four domestic retail sales
offices and have organized our sales efforts in the rest of the world around three regional territories: Europe, Middle East and
Africa (headquartered in the Netherlands); Japan (headquartered in Yokohama); and non−Japan Asia/ Pacific (headquartered in
Hong Kong), which we refer to as Asia Pacific. Information regarding our sales by geography is included in Note 4 to our
consolidated financial statements included in Item 8.
We also sell product to smaller retailers through distributors. Our retail distributors include AVS Technologies, Inc.,
Duttenhofer GMBH & Co., Hama Corporation, Inc., Ingram Micro, Inc., Princeton Technology Corporation and Wynit, Inc., in
addition to approximately 50 other distributors.
During 2004, we began building a separate distribution network focused on the cellular phone market. Our distributors provide
us access to mobile network operator branded storefronts as well as other retailers with significant mobile communications
offerings. We intend to continue to emphasize offering our products throughout the mobile communication retail community as
an important driver of our planned growth in that market.
• OEM. Our OEM customers include digital camera manufacturers, mobile phone manufacturers and the manufacturers of other
digital consumer devices, such as GPS receivers. Our products are sold directly to OEMs and through distributors. Our OEM
direct sales force is supported in its sales efforts by more than 50 independent manufacturers’ representative firms. These
manufacturers’ representative firms sell our products as well as products from other manufacturers.
As of the end of 2004 and 2003, our backlog was $78.6 and $78.7 million, respectively. The following table describes the
distribution of our net product revenues (in millions): 2004 2003 2002
Retail $ 1,236.0 $ 632.1 $ 315.4
OEM $ 366.8 $ 350.2 $ 177.5
The significance of our North American retail channel to our business has resulted in our revenues being seasonally higher in our
fourth quarter holiday season. Our first and third quarters have sometimes been seasonally lower than their preceding quarters.
Our Customers. In 2004, 2003 and 2002, revenues from our top 10 customers and licensees accounted for approximately 55%,
48% and 45% of our revenues, respectively. In each of those years, no single customer or licensee accounted for greater than 10% of
our total revenues. The composition of our major customer base from year to year has changed over time, and we expect this pattern to
continue as our markets and strategy evolve. Sales to our customers are generally made pursuant to purchase orders rather than
long−term contracts.
Our Products. Our products can be categorized by form factor, performance and technology. Form factor generally correlates with
our targeted end−market. 4