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PART I
ITEM 1. BUSINESS
Statements in this report, which are not historical facts, are forward-looking statements within the meaning of
the federal securities laws. These statements may contain words such as “expects,” “anticipates,” “intends,”
“plans,” “believes,” “seeks,” “estimates” or other wording indicating future results or expectations. Forward-
looking statements are subject to risks and uncertainties. Our actual results may differ materially from the results
discussed in these forward-looking statements. Factors that could cause our actual results to differ materially
include, but are not limited to, those discussed in “Risk Factors” in Item 1A of this report, and elsewhere in this
report. Our business, financial condition or results of operations could be materially adversely affected by any of
these factors. We undertake no obligation to revise or update any forward-looking statements to reflect any event or
circumstance that arises after the date of this report. References in this report to “SanDisk»,” “we,” “our,” and
“us,” collectively refer to SanDisk Corporation, a Delaware corporation, and its subsidiaries. All references to
years or annual periods are references to our fiscal years, which consisted of 52 weeks in 2007, 2006 and 2005.
Overview
Who We Are. SanDisk Corporation, a S&P 500 company, is the inventor of and worldwide leader in NAND-
based flash storage cards. Flash storage technology allows data to be stored using limited power in a durable,
compact format that retains the data after the power has been turned off. Our mission is to provide simple, reliable
and affordable storage for consumer use in portable devices. We sell SanDisk branded products for consumer
electronics through broad global retail and original equipment manufacturer, or OEM, distribution channels.
We design, develop and manufacture products and solutions in a variety of form factors using our flash
memory, controller and firmware technologies. We source the vast majority of our flash memory supply through our
significant flash venture relationships with Toshiba Corporation, or Toshiba, which provide us with leading edge
low-cost memory wafers. Our cards are used in a wide range of consumer electronics devices such as mobile
phones, digital cameras, gaming devices and laptop computers. We also produce Universal Serial Bus, or USB,
drives, MP3 players and other flash storage products that are embedded in a variety of systems for the enterprise,
industrial, military and other markets.
Our Strategy. Our strategy is to be an industry-leading low cost supplier of flash storage solutions and to
develop large scale high-growth markets for flash storage products. We maintain our technology leadership by
investing in flash memory fabrication capacity and advanced technologies in order to produce leading-edge, low
cost flash memory for use in end-products that we design. We are a one-stop-shop for our retail and OEM
customers, selling all major flash storage card formats for our target markets in high volumes.
Our revenues are driven by the sale of our products and the licensing of our intellectual property. We believe
the market for flash storage is price elastic. From fiscal years 2006 to 2007, we increased the number of megabytes
sold by 190% in large measure due to a decrease of 60% in our average selling price per megabyte over the same
period. This price decline is largely enabled by rapid technology innovation which significantly reduces our cost per
megabyte. Our management team believes that more applications for flash storage will be created through the
continued increase in the number of megabytes a consumer can purchase at a given price point. Price declines that
drove increased volume resulted, in part, in an increase in our product revenues from $2.9 billion in fiscal year 2006
to $3.4 billion in fiscal year 2007. In addition, our license revenue increased from $331 million in fiscal year 2006 to
$450 million in fiscal year 2007 as a result of continued adoption of flash technologies and increased sales by our
licensees.
We enable new markets for NAND flash memory through a variety of embedded and removable card form
factors, and we are founders or co-founders of most major form factors of flash storage cards in the market today.
We pioneered the Secure Digital, or SD
TM
, card, together with a subsidiary of Toshiba and Matsushita Electric
Industries, Ltd., or Matsushita, which owns the Panasonic brand. The SD card is currently the most popular form
factor of flash storage cards used in digital cameras. Subsequent to pioneering the SD card, we worked with mobile
network operators and handset manufacturers to develop the miniSD
TM
card and microSD
TM
card to satisfy the need
for even smaller form factor memory cards. The microSD card has become the leading card format for mobile
3