SanDisk 2000 Annual Report Download

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2 0 0 0 A n n u a l R e p o r t

Table of contents

  • Page 1
    2 0 0 0 Annua l Re p o rt

  • Page 2
    ... a n D is k C o r p o r a t io n is t h e w o r ld 's la r g e s t s u p p lie r o f fla s h d a t a s t o r a g e s ys t e m s . To d a y S a n D is k...m e n t m a n u fa c t u r e r s a n d t o e n d - u s e r s t h r o u g h m o r e t h a n 2 0 ,0 0 0 r e t a il o u t le t s w o r ld w id e . SNDK

  • Page 3
    ...Financial Highlights (In tho usand s, e xc e p t p e r share d ata) Ye ar End e d De c e m b e r 3 1, Re ve nue s Pro d uc t Lic e nse and ro yalty To tal re ve nue s N e t inc o m e Dilute d ne t inc o m e p e r share Share s use d in p e r share... ts To tal sto c kho ld e rs' e q uity $ 2000 5 2 5 ...

  • Page 4
    ...id d e v e lo p m e n t o f le a d in g e d g e fla s h m e m o r y t e c h n o lo g y a n d c o n t r o lle r s . W it h o u r s t r a t e g ic p a r t n e r To s h ib a a n d o u r a llie s in Ta... e n t ly t h e o n ly s u p p lie r s s h ip p in g m o n o lit h ic 5 12 m e g a b it fla s h c h ip ...

  • Page 5
    ... fo r d ig it a l m u s ic a n d o t h e r e le c t r o n ic c o n t e n t o n t h e ir m o b ile d e v ic e s . W e b e lie v e t h a t t h e s a...ic r o e le c t r o n ic s , L t d . t o d e v e lo p M P EG 4 c o m p r e s s io n fo r fu t u r e d ig it a l c a m e r a s , t o a llo w m o v ie c lip...

  • Page 6
    ... d Sa n D is k c o - in v e n t e d t h is p o s t a g e - s t a m p - s iz e d s o lid - s t a t e s t o r a g e c a r d t o m e e t t h e u n iq u e r e q u ir e m e n t s o f d ig it a l m u s ic p la y e r s , s m a r t p h o n e s , c e llu la r phones, c am c orders and p a g e r s . M u lt iM...

  • Page 7
    ... o r e m o r e p ic t u r e s , m u s ic a n d d a t a . Sa n D is k r e m o v a b le fla s h d a t a s t o r a g e s o lu t io n s m a k e it e a s y fo r c o n s u m e r s t o in c r e a s e c a p a c it y a s t h e ir n e e d s c h a n g e . To d a y m o r e t h a n 2 0 ,0 0 0 m a jo r r e t a il...

  • Page 8
    ... r d o ffe r s h ig h p e r fo r m a n c e a n d h ig h c a p a c it y a n d is a p p r o p r ia t e fo r a ll Sm a r t M e d ia d e v ic e s . It is a v a ila b le in c a p a c it ie s r a n g in g fr o m 8 M B - 12 8 M B . I m a g e M a t e T M D r iv e a n d F la s h P a t h T M A d a p t e r Th...

  • Page 9
    ... r s t o r in g a n y t y p e o f file - d a t a , v o ic e , v id e o c lip s , e m a il, a n d p h o t o g r a p h s , a ll o n a p o r t a... v ic e s , w e a r e d e d ic a t e d t o b e in g t h e g lo b a l m a r k e t le a d e r in fla s h m e m o r y s t o r a g e in the p o s t- PC c o ns um e...

  • Page 10
    ...n g e o f e m e r g in g a u d io a n d v id e o c o n s u m e r e le c t r o n ic s d e v ic e s s u c h a s d ig it a l m u s ic p la y e r s , g lo b a l p o s it io n in g s y s t e m s , e le c t r o n ic b o o k s a n d p e r s o n a l v id e o p la y e r s . It s d e s ig n c o m p lie s w it...

  • Page 11
    ... Financial Data (In tho usand s, e xc e p t p e r share d ata) Ye ar End e d De c e m b e r 3 1, Re ve nue s Pro d uc t Lic e nse and ro yalty To tal re ve nue s Co st o f re ve nue s Gro ss p ro fits Op e rating inc o m e N e t inc o m e N e t inc o m e p e r share B asic Dilute d Share s use...

  • Page 12
    ... no t to tal to ye arly e arning s p e r share , d ue to ro und ing and the fluc tuatio ns in the num b e r o f o p tio ns inc lud e d o r o m itte d fro m d ilute d c alc ulatio ns b ase d o n the sto c k p ric e o r o p tio n strike p ric e s. Se e N o te s to the Co nso lid ate d Financ ial State...

  • Page 13
    ... ing d isc ussio n sho uld b e re ad in c o njunc tio n w ith o ur c o nso lid ate d financ ial state m e nts and the no te s the re to . O v e r v ie w SanDisk w as fo und e d in 19 8 8 to d e ve lo p and m arke t flash d ata sto rag e syste m s. W e se ll o ur p ro d uc ts to the c o nsum e r e le...

  • Page 14
    ...ay b e fo rc e d to d o so ag ain if the c urre nt d e te rio ratio n in m arke t d e m and fo r o ur p ro d uc ts c o ntinue s and o ur inve nto ry le ve ls e xc e e d c usto m e r o rd e rs. In ad d itio n, w e m ay have to w rite d o w n o ur inve nto rie s if c o ntinue d p ric ing p re ssure re...

  • Page 15
    ... d itio ns also c o ntrib ute d to the g ro w th in re se arc h and d e ve lo p m e nt e xp e nse s in b o th ye ars. The ad d itio nal p ro je c t e xp e nse s in 2 0 0 0 w e re to sup p o rt the d e ve lo p m e nt o f ne w g e ne ratio ns o f flash d ata sto rag e p ro d uc ts inc lud ing the 5 12...

  • Page 16
    ... o ur m arke ting ac tivitie s fo r o ur Se c ure Dig ital Card p ro d uc ts. G e n e r a l a n d A d m in is t r a t iv e . Ge ne ral and ad m inistrative e xp e nse s inc lud e the c o st o f o ur financ e , info rm atio n syste m s, hum an re so urc e s, share ho ld e r re latio ns, le g al and...

  • Page 17
    ... first tw o ye ars o f the ag re e m e nt. PM I w ill m anufac ture the kio sks fo r the jo int ve nture and w ill install and m aintain the kio sks und e r c o ntrac t w ith the jo int ve nture . W e e xp e c t to d e p lo y the first kio sks in p ilo t p ro g ram s in se le c te d re tail sto re...

  • Page 18
    ... p ric e o f the UM C share s. W hile w e d o no t antic ip ate the ne e d fo r suc h fund s in the c urre nt ye ar, w e m ay liq uid ate a p o rtio n o f the UM C share s that are availab le fo r sale , and use the p ro c e e d s to sup p o rt o ur o p e ratio ns and c ap ital e xp e nd iture s. Im...

  • Page 19
    ... p ro d uc t re c alls; • le ng the ning in m anufac turing c yc le tim e s d ue to o ur sup p lie rs o p e rating at p e ak c ap ac ity; • inc re ase d re se arc h and d e ve lo p m e nt e xp e nse s; • e xc hang e rate fluc tuatio ns, p artic ularly the U.S. d o llar to Jap ane se ye n e xc...

  • Page 20
    ... c o uld harm o ur b usine ss, financ ial c o nd itio n and re sults o f o p e ratio ns. D 2 fla s h t e c h n o lo g y W e have d e ve lo p e d ne w p ro d uc ts b ase d o n D2 flash te c hno lo g y, a flash arc hite c ture d e sig ne d to sto re tw o b its in e ac h flash m e m o ry c e ll. H ig...

  • Page 21
    ...q ually share the startup e xp e nse s and the w afe r o utp ut. W e w ill use the ne w p ro d uc tio n c ap ac ity at Do m inio n to m anufac ture p rim arily N AN D flash m e m o ry w afe rs w ith m inim um litho g rap hic fe ature size o f 0 .16 m ic ro n initially, m o ving to 0 .13 m ic ro n in...

  • Page 22
    ... . In ad d itio n, w e b e lie ve that the se OEM s m ay re d e sig n the ir p latfo rm s to w o rk w ith o ur Se c ure Dig ital Card , w hic h w e b e g an ship p ing in the first q uarte r o f 2 0 0 1. Ac c o rd ing ly, w e m ay e xp e rie nc e a d ro p in d e m and fro m o ur M ultiM e d iaCard...

  • Page 23
    ...the p ro d uc tio n o r ship m e nt o f flash m e m o ry w afe rs o r M ultiM e d iaCard p ro d uc ts b y o ur Taiw ane se fo und rie s and sub c o ntrac to r. Se e " - W e d e p e nd o n o ur sup p lie rs and third p arty sub c o ntrac to rs." W e use a third - p arty sub c o ntrac to r in China fo...

  • Page 24
    ...l; • ad ve rse tax rule s and re g ulatio ns; • w e ak p ro te c tio n o f o ur inte lle c tual p ro p e rty rig hts; and • d e lays in p ro d uc t ship m e nts d ue to lo c al c usto m s re stric tio ns. W e d e p e n d o n o u r s u p p lie r s a n d t h ir d p a r t y s u b c o ntra c to rs...

  • Page 25
    ...ic al inno vatio n that allo w s e ac h flash m e m o ry c e ll to sto re tw o b its o f info rm atio n inste ad o f the trad itio nal sing le b it sto re d b y the ind ustry stand ard flash te c hno lo g y. Furthe rm o re , w e e xp e c t to fac e c o m p e titio n fro m e xisting c o m p e tito rs...

  • Page 26
    ... b usine ss, financ ial c o nd itio n and re sults o f o p e ratio ns. In ad d itio n, w e c anno t assure yo u that the Do m inio n fab ric atio n fac ility w e are c o - d e ve lo p ing w ith To shib a, w ill p ro d uc e satisfac to ry q uantitie s o f w afe rs w ith ac c e p tab le p ric e s, re...

  • Page 27
    ...m anag e o ur e m p lo ye e s. W e have e xp e rie nc e d d iffic ulty hiring the ne c e ssary e ng ine e ring , sale s and m arke ting p e rso nne l to sup p o rt o ur g ro w th. In ad d itio n, w e m ust m ake a sig nific ant inve stm e nt in o ur e xisting inte rnal info rm atio n m anag e m e nt...

  • Page 28
    ...rinc ip al c usto m e rs re g ard ing te c hno lo g ic al inno vatio ns, ne w p ro d uc t intro d uc tio ns, g o ve rnm e ntal re g ulatio ns, litig atio n o r c hang e s in e arning s e stim ate s b y analysts. In ad d itio n, in re c e nt ye ars the sto c k m arke t has e xp e rie nc e d sig nific...

  • Page 29
    ...ar value Autho rize d share s: 12 5 ,0 0 0 ,0 0 0 Issue d and o utstand ing : 6 7,4 6 4 ,0 0 0 in 2 0 0 0 and 6 5 ,2 4 8 ,0 0 0 in 19 9 9 Cap ital in e xc e ss o f p ar value Re taine d e arning s Ac c um ulate d o the r c o m p re he nsive inc o m e (lo ss) To tal sto c kho ld e rs' e q uity To tal...

  • Page 30
    ... tho usand s, e xc e p t p e r share d ata) Ye ars End e d De c e m b e r 3 1, Re ve nue s Pro d uc t Lic e nse and ro yalty To tal re ve nue s Co st o f re ve nue s Gro ss p ro fits Op e rating e xp e nse s Re se arc h and d e ve lo p m e nt Sale s and m arke ting Ge ne ral and ad m inistrative To...

  • Page 31
    ...m p lo ye e sto c k p urc hase p lan Co m p e nsatio n e xp e nse re late d to m o d ific atio n o f sto c k o p tio ns Sale o f c o m m o n sto c k, ne t o f issuanc e c o sts Inc o m e tax b e ne fit fro m sto c k o p tio ns e xe rc ise d B alanc e at De c e m b e r 3 1, 2 0 0 0 Share s Am o unt...

  • Page 32
    ... Flows ((In tho usand s) Ye ars End e d De c e m b e r 3 1, C a s h flo w s fr o m o p e r a t in g a c t iv it ie s : 2000 19 9 9 19 9 8 N e t inc o m e Ad justm e nts to re c o nc ile ne t inc o m e to ne t c ash p ro vid e d b y o p e rating ac tivitie s: De fe rre d taxe s Gain o n inve stm...

  • Page 33
    ... f O p e r a t io n s SanDisk Co rp o ratio n (the Co m p any) w as inc o rp o rate d in De law are o n June 1, 19 8 8 , to d e sig n, m anufac ture , and m arke t ind ustry- stand ard , so lid - state m ass sto rag e p ro d uc ts using p ro p rie tary, hig h- d e nsity flash m e m o ry te c hno lo...

  • Page 34
    ... c o unts is as fo llo w s (in tho usand s): Fo r the ye ar e nd e d De c . 3 1, 19 9 8 19 9 9 2000 Ad d itio ns B alanc e at Charg e d to B e g inning Co sts and De d uc tio ns o f Pe rio d Exp e nse s (W rite - o ffs) $ 75 6 $ 345 $ 32 $ 1,0 6 9 $ 945 $ 14 3 $ 1,8 71 $ 3 ,9 9 1 $ 852 B alanc e at...

  • Page 35
    ...its Am e ric an De p o sitary Share s (" ADRs" ) o ffe ring . In c o nne c tio n w ith this o ffe ring , SanDisk sig ne d a lo c k- up ag re e m e nt that p ro hib its the sale o f all b ut 5 m illio n o f the se unre stric te d UM C share s fo r a p e rio d o f 9 0 d ays fo llo w ing the c o m p le...

  • Page 36
    ... e r S h a r e The fo llo w ing tab le se ts fo rth the c o m p utatio n o f b asic and d ilute d ne t inc o m e p e r share (in tho usand s, e xc e p t p e r share am o unts): 2000 N um e rato r: N um e rato r fo r b asic and d ilute d ne t inc o m e p e r share - ne t inc o m e De no m inato r fo...

  • Page 37
    ... ute s re lating to the use b y Le xar o f the ' 9 8 7 Pate nt thro ug h b ind ing arb itratio n. W e have also ag re e d that fo r a p e rio d o f se ve n ye ars, ne ithe r SanDisk no r Le xar shall se e k injunc tive re lie f ag ainst the o the r in any p ate nt law suit. H o w e ve r, at all tim...

  • Page 38
    ... ye ar, b ut in no e ve nt w ill any suc h annual inc re ase e xc e e d 4 ,0 0 0 ,0 0 0 share s. 19 9 5 N o n - e m p lo ye e D ir e c t o r s S t o c k O p t io n P la n The 19 8 9 Sto c k B e ne fit Plan, in e ffe c t thro ug h Aug ust 19 9 5 , c o m p rise d tw o se p arate p ro g ram s, the Sto...

  • Page 39
    ... the Co m p any ad o p te d the Em p lo ye e Sto c k Purc hase Plan (the Purc hase Plan). In M ay 19 9 9 , the sto c kho ld e rs inc re ase d the share s availab le fo r future issuanc e und e r the Em p lo ye e Sto c k Purc hase Plan b y 6 0 0 ,0 0 0 and ap p ro ve d an auto m atic share inc re ase...

  • Page 40
    ... b e e n re d uc e d to the p ro fo rm a am o unts ind ic ate d b e lo w (in tho usand s, e xc e p t p e r share am o unts): Ye ars e nd e d De c e m b e r 3 1, Pro fo rm a ne t inc o m e Pro fo rm a ne t inc o m e p e r share B asic Dilute d 2000 19 9 9 $ 2 7 6 ,4 2 1 $ 19 ,6 2 5 19 9 8 $ 7,5 75...

  • Page 41
    ... w afe r o utp ut fro m the ad vanc e d fab ric atio n fac ility To w e r is starting to b uild in M ig d al H ae m e k, Israe l. Und e r the te rm s o f the ag re e m e nt, the Co m p any w ill m ake o ur inve stm e nt o ve r a p e rio d o f ap p ro xim ate ly 18 m o nths if ke y m ile sto ne s re...

  • Page 42
    ... fo r future d ig ital c am c o rd e rs that w ill b e c ap ab le o f using o ur flash m e m o ry c ard s to sto re ho m e vid e o m o vie s, re p lac ing the m ag ne tic tap e c urre ntly use d in the se syste m s. Und e r the ag re e m e nt, SanDisk o w ns ap p ro xim ate ly 10 % o f Divio and is...

  • Page 43
    ...e Pre sid e nt, Financ e and Ad m inistratio n M ic h a e l G r a y Vic e Pre sid e nt, Financ e Sha ron Spe ha r Share ho ld e r Re latio ns (1) Aud it Co m m itte e (2 ) Co m p e nsatio n Co m m itte e ©2 0 0 1 SanDisk Co rp o ratio n. All rig hts re se rve d . SanDisk and the SanDisk lo g o are...

  • Page 44
    S a n D is k C o r p o r a t io n 14 0 Casp ian Co urt Sunnyvale , Califo rnia 9 4 0 8 9 - 10 0 0 USA T: 4 0 8 .5 4 2 .0 5 0 0 F: 4 0 8 .5 4 2 .0 5 0 3 w w w .sand isk.c o m