SanDisk 2008 Annual Report Download - page 11

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•Mobile Phones. We provide embedded, semi-removable and removable storage for mobile phones. We
are a leading supplier of the microSD, SD and Memory Stick product lines of removable storage cards
used in mobile phones. Multimedia features in mobile phones, such as camera functionality, audio/
MP3, games, video or internet access, have been increasing in popularity. These features require
additional storage capacity in the mobile phone and transferability of data between devices.
•Computing. We provide multiple flash storage devices and solutions for a variety of computing,
industrial and enterprise markets. USB flash drives allow consumers to store computer files, pictures
and music on keychain-sized devices and then quickly and easily transfer these files between laptops,
notebooks, desktops and other devices that incorporate a USB connection. USB flash drives are easy to
use, have replaced floppy disks and other types of external storage media, and are evolving into
intelligent storage devices. In addition, we sell SSDs that are flash-based storage devices with
capacities currently up to 64 gigabytes. We believe SSDs will become a major market for flash
memory over the next several years as they increasingly replace hard disk drives in personal and
notebook computers, and enterprise server products.
Our Sales Channels. Our products are delivered to end-users through worldwide retail storefronts and also
by bundling data storage cards with host products or by embedding our data storage products in host devices sold
by our OEM customers.
Our sales are made through the following channels:
•Retail. We ship SanDisk brand products directly to consumer electronics stores, office superstores,
photo retailers, mobile phone stores, mass merchants, catalog and mail order companies, internet and
e-commerce retailers, drug stores, supermarkets and convenience stores. We also sell our products to
smaller or regional retailers through distributors.
We have a separate distribution network focused on the mobile phone market. Our distributors provide
us access to mobile network branded storefronts as well as other retailers with significant mobile
communications offerings.
We support our retail sales channels with both direct sales representatives and independent
manufacturers’ representatives. We have organized our sales activities into four regional territories:
Americas, Europe, Middle East and Africa, or EMEA, Asia Pacific, or APAC, and Japan.
•OEM. Our OEM customers include manufacturers of mobile phones, digital cameras, PCs, GPS and
other digital consumer devices, such as gaming devices. Our products are sold directly to OEMs and
through distributors. We support our OEM customers through our direct sales representatives as well as
through independent manufacturers’ representatives.
As of the end of fiscal years 2008 and 2007, our backlog was $169 million and $224 million, respectively.
Due to industry practice that allows customers to change or cancel orders with limited advance notice prior to
shipment, we do not believe that backlog, as of any particular date, is indicative of future sales.
Our revenues are generally highest in our fourth quarter due to the holiday buying season. In the fourth
quarter of fiscal year 2008, the seasonal lift in our revenues was less than usual due to worldwide recessionary
conditions and aggressive industry pricing.
Our Customers. In fiscal years 2008, 2007 and 2006, revenues from our top 10 customers and licensees
accounted for approximately 48%, 46% and 52% of our total revenues, respectively. In fiscal year 2008,
Samsung accounted for 13% of our total revenues through a combination of license and royalty and product
revenues. All customers were less than 10% of our total revenues in fiscal years 2007 and 2006. The composition
of our major customer base has changed over time, and we expect this pattern to continue as our markets and
strategies evolve. Sales to our customers are generally made pursuant to purchase orders rather than long-term
contracts.
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