SanDisk 2013 Annual Report Download - page 5

30JUL201319362378
SanDisk Corporation
951 SanDisk Drive
Milpitas, CA 95035-7933
Dear SanDisk Stockholders,
2013 was a stellar year for SanDisk. We delivered a record $6.2 billion in revenue, strong operating margins of 25%
GAAP and 29% non-GAAP, a record $1.9 billion of cash flow from operations and $1.7 billion of free cash flow. In a
year when the NAND industry revenue grew by about 17%, SanDisk revenue grew 22%, reflecting our excellent
position in the markets we serve and demonstrating our ability to service a diverse set of global customers.
Solid State Drives (SSD)
We grew our SSD revenue by 170% in 2013. By strengthening our presence in both the client and enterprise SSD
markets, our SSD revenue grew to 19% of the Company’s 2013 revenue, up from 9% in 2012. For the client SSD
market, we are a qualified supplier to all leading PC OEMs providing a variety of form factors, performance levels and
interfaces such as PCIe and SATA. The PC OEMs rely on SanDisk for our innovations in the client SSD market.
Within enterprise SSDs, our Lightning↧ SAS-based drives delivered strong revenue growth; and with the acquisition of
SMART Storage Systems, we expanded our SAS SSD portfolio and began addressing the SATA SSD market. The
acquisition also brought SMART’s Guardian technology, which adds to our systems expertise for improving the
performance and endurance of NAND Flash solutions. We also launched an exciting new solutions category called
ULLtraDIMM↩, an ultra-low latency SSD, further expanding our enterprise portfolio. In 2014, we expect enterprise
SSDs to be SanDisk’s fastest growing product category.
Embedded
Revenue from embedded products grew 37% in 2013 from the prior year. We are a key supplier to all major mobile
device manufacturers and have become a valued partner to a growing number of device manufacturers in the emerging
markets, particularly in China. Our broad embedded portfolio consisting of iNAND↩, iNAND MCP and customized
embedded solutions is finding its way into an increasing number of mobile devices. Recently, we launched our
next-generation mobile embedded storage solution—iNAND Extreme↩, the fastest, thinnest and most sophisticated
embedded storage product from SanDisk to date. This solution has a device architecture that reduces data latency and
takes application performance of mobile phones and tablets to the next level.
Removable
Our removable products are sold in both commercial and retail channels. Our offerings in the retail channel remain a
key differentiator for the company, with 2013 marking a year of record retail revenue. The strength of the SanDisk
brand is a significant competitive advantage, and our products are now sold through more than 300,000 storefronts
worldwide. The breadth of our offerings in imaging, mobile and USB categories is key to our success in worldwide
retail channels. Our global retail presence continued to increase in 2013, highlighting consumer preference for our
high-quality products and the trusted SanDisk brand.
Profitability, Cash Flow and Capital Returns
In addition to our record revenue, we delivered excellent operating margins of 25% GAAP and 29% non-GAAP, and
this translated into record cash flow from operations of $1.9 billion. After accounting for capital investments, our free
cash flow was $1.7 billion, and we returned 98% of free cash flow to shareholders through share repurchases and cash
dividends.
Stockholders Letter