SanDisk 2003 Annual Report Download - page 18

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line and the Secure MultiMediaCard from Renesas and InÑneon, the RS-MMC from Renesas and Samsung,
and the MultiMediaCard from Samsung all compete with our SD and MMC cards. In addition, in 2002, the
xD-picture card format was introduced as direct competition for our Smart Media card products. We
experienced a decline in sales of Smart Media card products in 2002 and 2003 and expect a continued decline
in sales of these products in 2004 as sales of xD-picture cards increases. We compete with Sony and Lexar in
the market for Memory Stick products. Sony has a very strong brand name which may make their Memory
Stick cards more attractive to some customers than our comparable cards. In 2004, we expect to begin
manufacturing and oÅering a SanDisk labeled version of the Memory Stick PRO and Memory Stick Pro Duo
product lines. Additionally, Olympus' and Fuji's control of the market for digital cameras using the xD-picture
card format gives them a competitive advantage in selling xD-picture cards to retail customers. Rotating disk
drives, including among others, the Microdrive, compete with our larger capacity Öash memory cards. In
addition, other companies, such as Matrix Semiconductor, have announced products or technologies that may
potentially compete with our Shoot and Store products. Additionally, new card formats, like the Express Card
are periodically introduced in an eÅort to compete with the existing standards for memory cards. New
competing standards may not be mechanically and electronically compatible with our products. If a
manufacturer of digital cameras or other consumer electronic devices designs in one of these alternative
competing standards, our products will be eliminated from use in that product.
We also face competition from products based on alternative MLC Öash technology from Intel (Strata
Flash), Renesas (AG-AND) and InÑneon Flash (Twin bit). These products compete with our NAND MLC
products.
Furthermore, we expect to face competition both from existing competitors and from other companies
that may enter our existing or future markets with similar or alternative data storage solutions, which may be
less costly or provide additional features. Our business is characterized by rapid innovation and many other
companies are pursuing new technologies, which may make our Öash memory obsolete or uncompetitive in a
few years. Additionally, if we do not continue to invest in new technologies, our business would likely be
seriously harmed.
We believe that our ability to compete successfully depends on a number of factors, including:
‚ price, quality, and on-time delivery to our customers;
‚ product performance, availability and diÅerentiation;
‚ success in developing new applications and new market segments;
‚ adequate manufacturing capacity;
‚ eÇciency of production;
‚ timing of new product announcements or introductions by us, our customers and our competitors;
‚ the ability of our competitors to incorporate their Öash data storage systems into their customers'
products;
‚ the number and nature of our competitors in a given market;
‚ successful protection of intellectual property rights; and
‚ general market and economic conditions.
We cannot assure you that we will be able to compete successfully against current and future competitors
or that competitive pressures faced by us will not materially adversely aÅect our business, Ñnancial condition
or results of operations.
Employees
As of December 28, 2003, we had 751 full-time employees and 54 temporary employees, including 283 in
research and development, 147 in sales and marketing, 165 in general and administration and 210 in
operations. Our success is dependent upon our retention of key technical, sales and marketing employees and
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