SanDisk 2005 Annual Report Download - page 81

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Import BV, Ingram Micro, Inc., Kaga Electronics Co., Ltd., Princeton Technology Corporation, Tech Data
Corporation and Wynit, Inc., in addition to approximately 50 other distributors.
We have 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.
We support our retail sales channels with both direct sales representatives and independent manufacturers’
representatives. We have multiple 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, or EMEA, Japan and
non-Japan Asia/Pacific, 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 of this report.
•OEM. Our OEM customers include manufacturers of digital cameras, mobile phones and other digital
consumer devices, such as GPS receivers. Our products are sold directly to OEMs and through distributors.
We support our OEM customers with both direct sales representatives and independent manufacturers’
representatives.
Due to industry practice that allows customers to change or cancel orders with limited advance notice prior to
shipment, we do not believe that backlog as of any particular date is indicative of future sales. As of the end of fiscal
2005 and fiscal 2004, our backlog was $105.7 and $78.6 million, respectively. The following table describes the
distribution of our net product revenues (in millions):
FY 2005 FY 2004 FY 2003
Retail .............................................. $1,621.0 $1,236.0 $632.1
OEM .............................................. 445.6 366.8 350.2
Product revenue ...................................... $2,066.6 $1,602.8 $982.3
The significance of our North American retail channel to our business has resulted in our revenues being
seasonally higher in our fourth quarter due to the holiday buying season. Our first and third quarters have sometimes
been seasonally lower than their preceding quarters.
Our Customers. In 2005, 2004 and 2003, revenues from our top 10 customers and licensees accounted for
approximately 50%, 55% and 48% of our revenues, respectively. In 2005, Best Buy accounted for 11% of our total
revenues; all other customers were less than 10% of our revenues. In 2004 and 2003, 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 strategies 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 and performance. Form factor generally
correlates with our targeted end-market.
We make many form factors of removable data storage cards as well as USB flash drives and flash digital audio
players. The principal form factors of our products are:
•CompactFlash. Our CF products are characterized by high performance. CF products are well-suited for a
range of consumer applications, including digital still cameras and audio recorders. CF cards are available in
capacities ranging from 32 megabytes to 8 gigabytes.
•SD. The SD card provides content copyright protection features. This form factor is used in digital
cameras, mobile phones, gaming devices, GPS receivers, PDAs and digital audio players in the consumer
electronics marketplace. We offer SD cards in storage capacities of 32 megabytes to 2 gigabytes.
•miniSD Card. The miniSD card is a smaller version of the SD card which leverages the feature-set of the
standard SD card but is designed for small mobile phones. An optional full-size SD card adapter allows
miniSD cards to be used in full size SD card applications thereby acting as a bridge to the large range of
SD-based consumer and telecommunications devices. Capacities range from 128 megabytes to 2 gigabyte.
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