SanDisk 2013 Annual Report Download - page 125

• incurring non-recurring charges, increased contingent liabilities, adverse tax consequences,
depreciation or deferred compensation charges, amortization or impairment of intangible assets or
impairment of goodwill, which could harm our results of operations; and
• potential delay in customer purchasing decisions due to uncertainty about the direction of our
product offerings or those of the acquired business.
In August 2013, we completed the acquisition of SMART Storage, a developer of enterprise SSDs. In
addition to the risks described above, additional factors associated with the acquisition of SMART Storage
that could harm our ability to realize the potential financial or strategic benefits of the acquisition and
thereby harm our growth prospects or results of operations include but are not limited to:
• failure of SMART Storage’s products or technologies to perform as expected or to meet customer
qualification requirements;
• failure of the enterprise SSD space to grow as expected;
• delays in the timing and successful integration of SMART Storage, including the transition of the
SMART Storage business from third-party sources of NAND flash memory and other components
to our captive supply of these materials, which could harm our ability to achieve the expected
benefits from the acquisition in a timely manner or at all;
• difficulty in maintaining SMART Storage’s supplier or vendor arrangements, upon some of which
SMART Storage is significantly reliant, which could harm our ability to maintain the business after
the acquisition;
• failure to retain SMART Storage’s key employees, particularly for the continued development of
SMART Storage’s technology; and
• difficulty in integrating SMART Storage’s technology into other product lines, which could diminish
our expected benefits of the acquisition.
In the third quarter of fiscal year 2013, we recorded impairment charges of $47 million related to
amortizable intangible assets and $36 million related to an in-process research and development intangible
asset, both from the acquisition of Pliant Technology, Inc., or Pliant. These impairment charges stem
primarily from our decision to integrate more of the SMART Storage architecture and technology into our
future enterprise product roadmap and from the delay of our next-generation SSD platform built on the
Pliant technology. We will continue to monitor for any events or circumstances that could indicate whether
an impairment of the remaining Pliant acquisition-related intangible assets is required.
Our financial performance and the value of our investments depend significantly on worldwide economic
conditions, which have deteriorated in many countries and regions, and may not recover in the foreseeable
future. Demand for our products is harmed by negative macroeconomic factors affecting consumer and
enterprise spending. Continuing high unemployment rates, low levels of consumer liquidity, risk of default
on sovereign debt and volatility in credit and equity markets have weakened consumer confidence and
decreased consumer and enterprise spending in many regions around the world. These and other economic
factors may reduce demand for our products and harm our business, financial condition and operating
results. In addition, we maintain investments, including our cash, cash equivalents and marketable
securities, of various holdings, types and maturities and, given the global nature of our business, our
investment portfolio includes both domestic and international investments. Credit ratings and pricing of
these investments can be negatively affected by liquidity, credit deterioration, financial results, economic
risk, political risk, sovereign risk or other factors, and declines in the credit ratings or pricing of our
investments could result in a decline in the value and liquidity of our investments, including our cash, cash
equivalents and marketable securities, and result in a significant impairment of our assets.
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Annual Report