SanDisk 2007 Annual Report Download - page 86

expected life of the core technology and discount rates. Unanticipated events and circumstances may occur which
may affect the accuracy or validity of such assumptions, estimates or actual results.
Results of Operations
Product Revenues.
FY 2007
Percent
Change FY 2006
Percent
Change FY 2005
(In millions, except percentages)
Retail .............................. $2,162.5 9% $1,975.5 22% $1,621.0
OEM .............................. 1,283.6 35% 951.0 113% 445.6
Product revenues...................... $3,446.1 18% $2,926.5 42% $2,066.6
The increase in our fiscal year 2007 product revenues was comprised of a 190% increase in the number of
megabytes sold, partially offset by a 60% reduction in average selling price per megabyte. Our unit sales increased
75% compared to fiscal year 2006 with the strongest unit growth coming from cards for mobile phones. OEM
revenue particularly benefited from higher sales of mobile cards and embedded products to mobile handset vendors.
Retail revenue growth benefited from the growing market for cards for mobile phones as well as increased sales of
USB flash drives.
The increase in our fiscal year 2006 product revenues was comprised of a 246% increase in the number of
megabytes sold, partially offset by a 59% reduction in our average selling price per megabyte. The markets that we
sell to have experienced price elasticity of demand. In fiscal year 2006, as the price per megabyte decreased, the
average memory density of our products sold increased by 67%. Our unit sales also increased by 106% with the
growth in our unit sales primarily attributable to growth in sales of cards for mobile phones and flash-based digital
audio players. OEM revenues particularly benefited from higher sales of mobile cards to mobile phone manu-
facturers, 3D gaming cards and from our acquisition of msystems Ltd., or msystems, which accounted for an
additional $115 million of revenue. Retail revenue growth benefited primarily from higher sales of mobile cards,
flash-based digital audio players and USB flash drives.
Geographical Product Revenues.
Revenue
Percent of
Total Revenue
Percent of
Total Revenue
Percent of
Total
FY 2007 FY 2006 FY 2005
(In millions, except percentages)
United States ............ $1,193.6 35% $1,259.8 43% $ 978.0 47%
Japan.................. 283.8 8% 194.0 7% 104.4 5%
EMEA................. 889.7 26% 728.4 25% 501.0 24%
APAC and other foreign
countries ............. 1,079.0 31% 744.3 25% 483.2 24%
Product revenues ......... $3,446.1 100% $2,926.5 100% $2,066.6 100%
In fiscal year 2007, revenue growth was strong in both APAC and EMEA primarily as a result of increased
sales to OEM mobile handset vendors and the growth of mobile card and USB sales in international retail channels.
Japan revenue increased from fiscal year 2006 to fiscal year 2007 primarily as a result of product revenue from our
msystems acquisition in November 2006. Unit sales in United States increased 41% over fiscal year 2006; however
total revenues in United States were lower by 2% due primarily to aggressive price reductions in fiscal year 2007.
In fiscal year 2006, on an absolute basis, revenues in all regions increased year-over-year. Revenue from other
foreign countries, which is primarily Asia, increased the most, primarily reflecting increased sales to mobile phone
manufacturers and their related contract manufacturers. Sales in Japan increased primarily from higher sales of 3D
gaming cards from our acquisition of Matrix Semiconductor, Inc., or Matrix. The increase in sales in United States
was due primarily to sales of our flash-based digital audio players, sales of cards for mobile phones and USB drives.
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