SanDisk 2005 Annual Report Download - page 110

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Results of Operations
Product Revenues.
FY 2005
Percent
Change FY 2004
Percent
Change FY 2003
(In millions, except percentages)
Retail ............................... $1,621.0 31% $1,236.0 96% $632.1
OEM ............................... 445.6 21% 366.8 5% 350.2
Product revenues ....................... $2,066.6 29% $1,602.8 63% $982.3
The increase in our 2005 product revenues was comprised of a 166% increase in the number of megabytes sold
and partially offset by a 52% reduction in our average selling price per megabyte. The markets that we sell to have
been price elastic. In 2005, as the price per megabyte came down, the average memory density of our products sold
increased by 215%. Our unit sales also increased by 23% with the growth in our unit sales primarily attributable to
growth in the markets for mobile cards for camera-phones and music-centric phones, USB flash drives and flash-
based digital audio players. We expect to continue to reduce our price per megabyte, including price reductions
already initiated in 2006, as technology advances allow us to further reduce our cost per megabyte. Partially
offsetting the 2005 growth in revenues was the fact that fiscal 2005 consisted of 52 weeks as compared to 53 weeks
in the prior year.
The increase in our 2004 product revenues was comprised of a 167% increase in the number of megabytes sold
and partially offset by a 38% reduction in our average selling price per megabyte. Our 2004 unit sales increased by
53% compared to 2003, with the increase primarily attributable to growth in the markets for digital still cameras,
USB flash drives and feature phones with card slots and the introduction, in the fourth quarter of fiscal 2004, of
SanDisk flash-based digital audio players. In addition, our fiscal 2004 consisted of 53 weeks as compared to
52 weeks in the prior fiscal year.
Geographical Product Revenues.
Revenue
Percent of
Total Revenue
Percent of
Total Revenue
Percent of
Total
FY 2005 FY 2004 FY 2003
(In millions, except percentages)
North America . . . . . . . . . . . . . . . . . $1,049.6 51% $ 768.1 48% $417.4 42%
Japan . . . . . . . . . . . . . . . . . . . . . . . . 104.4 5% 165.4 10% 161.9 16%
EMEA . . . . . . . . . . . . . . . . . . . . . . . 501.0 24% 420.6 26% 232.1 24%
Other foreign countries . . . . . . . . . . . 411.6 20% 248.7 16% 170.9 18%
Product revenues . . . . . . . . . . . . . . . . $2,066.6 100% $1,602.8 100% $982.3 100%
In 2005, our revenue from Japan primarily reflects the reduction in the sales of flash memory cards to digital
camera OEMs based in Japan to the transition of after market sales of flash memory cards primarily in
North America and EMEA.
In 2004, the increase in North America and EMEA revenue reflects increased retail demand due to the growth
in consumer based products requiring additional flash memory.
License and Royalty Revenues.
FY 2005
Percent
Change FY 2004
Percent
Change FY 2003
(In millions, except percentages)
License and royalty revenues ................ $239.5 37% $174.2 79% $97.5
The increase in our 2005 and 2004 license and royalty revenue was primarily due to increased royalty bearing
sales by our licensees in each of those fiscal years.
35
Annual Report