SanDisk 2013 Annual Report Download - page 141

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Fiscal years ended
December 29, % of December 30, % of January 1, % of
2013 Revenue 2012 Revenue 2012 Revenue
(In millions, except percentages)
Revenue .................. $ 6,170.0 100.0% $ 5,052.5 100.0% $ 5,662.1 100.0%
Cost of revenue ............. 3,253.0 52.7% 3,326.7 65.8% 3,183.3 56.2%
Amortization of acquisition-
related intangible assets ...... 49.5 0.8% 42.6 0.9% 39.7 0.7%
Total cost of revenue ......... 3,302.5 53.5% 3,369.3 66.7% 3,223.0 56.9%
Gross profit ............... 2,867.5 46.5% 1,683.2 33.3% 2,439.1 43.1%
Operating expenses
Research and development .... 742.3 12.0% 602.7 11.9% 547.4 9.7%
Sales and marketing ........ 276.3 4.5% 224.1 4.4% 199.4 3.5%
General and administrative . . . 192.3 3.1% 150.4 3.0% 157.8 2.8%
Amortization of acquisition-
related intangible assets .... 11.2 0.2% 9.0 0.2% 4.4 0.1%
Impairment of acquisition-
related intangible assets .... 83.2 1.4% 0.9 —% — —%
Total operating expenses ....... 1,305.3 21.2% 987.1 19.5% 909.0 16.1%
Operating income ........... 1,562.2 25.3% 696.1 13.8% 1,530.1 27.0%
Other income (expense), net .... (46.1) (0.7%) (69.2) (1.4%) (53.3) (0.9%)
Income before income taxes .... 1,516.1 24.6% 626.9 12.4% 1,476.8 26.1%
Provision for income taxes ..... 473.4 7.7% 209.5 4.1% 489.8 8.7%
Net income ................ $ 1,042.7 16.9% $ 417.4 8.3% $ 987.0 17.4%
General
We are a global leader in NAND flash storage solutions. We sell our products globally to commercial
and retail customers. We design, develop and manufacture data storage solutions in a variety of form
factors using flash memory, controller, firmware and software technologies. Our solutions include SSDs,
embedded products, removable cards, USB drives, wireless media drives, digital media players, and wafers
and components. Our SSD products are used in both client computing platforms and enterprise data
centers and provide high-speed, high-capacity storage solutions that can be used in lieu of hard disk drives.
Our embedded flash products are used in mobile phones, tablets, computing platforms, imaging devices,
and many other products. Our removable cards are used in a wide range of consumer electronics devices
such as mobile phones, tablets, digital cameras, gaming devices and PCs.
We have a deep understanding of the technology used in the design, manufacture and operation of
NAND flash and have invented many of the key NAND flash technologies and solutions. We strive to
continuously reduce the cost of NAND flash in order to continue to grow our markets, supply a diverse set
of customers and channels, and enable us to profitably grow our business. A key component of our ability
to reduce the cost of NAND flash is our ability to continue to transition our NAND flash manufacturing
technology to smaller geometries. We currently expect to be able to continue to scale our current NAND
flash architecture (2D NAND) to the 1Y-nanometer node, which is currently in progress, and at least one
more technology node (1Z-nanometer), which is expected to ramp in late 2014 and throughout 2015.
Beyond the 1Z-nanometer node, there is no certainty that further technology scaling can be achieved
43
Annual Report