SanDisk 2006 Annual Report Download - page 55

We have a separate distribution network focused on the mobile 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 6 to our consolidated financial statements included in Item 8 of this report.
•OEM. Our OEM customers include manufacturers of mobile phones, digital cameras and other digital
consumer devices, such as GPS. Our products are sold directly to OEMs and through distributors. We
support our OEM customers with both direct sales representatives and independent manufacturers’
representatives.
As of the end of fiscal years 2006 and 2005, our backlog was $177.0 million and $105.7 million, respectively.
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.
Our revenues are seasonally higher in our fourth quarter due to the holiday buying season. Our first and third
quarters have sometimes been seasonally lower than the preceding quarters.
Our Customers. In fiscal years 2006, 2005 and 2004, revenues from our top 10 customers and licensees
accounted for approximately 52%, 50% and 55% of our revenues, respectively. In fiscal years 2006 and 2004, no
single customer or licensee accounted for greater than 10% of our revenues. In fiscal year 2005, Best Buy accounted
for 11% of our revenues. The composition of our major customer base 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 are sold under the SanDisk brand in a wide variety of form factors and include
the following:
•Removable Cards. Our removable data storage solutions are available in almost every major form factor in
our primary markets. For example, our CompactFlash removable cards, available in capacities up to
16 gigabytes, are well-suited for a range of consumer applications, including digital cameras. Our profes-
sional products include the SanDisk Ultra»and SanDisk Extreme»product lines which are designed with
additional performance and reliability. As another example, our ultra-small microSD removable cards,
available in capacities up to 4 gigabytes, are designed for use in mobile phones.
•USB Drives. Our Cruzer»line of USB drives, available in capacities up to 8 gigabytes, are highly-reliable
and high-performance. USB Flash Drives, or UFDs, are used in the computing and consumer markets. A
number of our Cruzers ship with U3
TM
smart technology which gives the user the ability to carry files and
application software on a secure USB drive. Also, our Cruzer Crossfire USB Flash Drives are specially
designed to make console or PC gaming experience portable. Using our USB flash drives, gamers can save
game data, download portable games and demos and save game replays.
•Embedded. Our embedded products are a set of reliable, high-capacity, high performance and cost-
effective embedded flash memory drive, or EFD, solutions for both data and code storage. Ranging in
capacities from 128 megabytes to 8 gigabytes, these products are designed to respond to the increasing
demand for embedded storage for mobile phones and other portable devices. We also offer high-capacity
solid-state drives targeted for the personal computing market in capacities up to 32 gigabytes.
•MP3. The Sansa is our branded line of flash-based MP3 players for the digital audio and video player
market. Many of our Sansa models offer a removable card slot for easy transportability of music between
devices and storage capacity expansion. The Sansa MP3 players also feature built-in FM tuning for non-
European models and voice recording capabilities and are compatible with a variety of music download and
subscription services. Sansa is available in capacities ranging from 256 megabytes to 8 gigabytes.
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