SanDisk 2008 Annual Report Download - page 111

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Notes to Consolidated Financial Statements
Flextronics. On January 10, 2008, Michael Marks, who serves on the Company’s Board of Directors,
resigned from Flextronics International, Ltd., (“Flextronics”), where he had held the position of chairman of the
Board of Directors. The activity from December 31, 2007 to January 10, 2008 between Flextronics and the
Company was immaterial. For the fiscal years ended December 30, 2007 and December 31, 2006, the Company
recorded revenues from Flextronics and its affiliates of $75.5 million and $106.6 million, respectively, and at
December 30, 2007, the Company had receivables from Flextronics and its affiliates of $0.6 million. In addition,
the Company purchased from Flextronics and its affiliates $72.6 million and $53.5 million of services for card
assembly and testing in the fiscal years ended December 30, 2007 and December 31, 2006, respectively, which
are ultimately reflected as a component of the Company’s cost of product revenues. At December 30, 2007, the
Company had amounts payable to Flextronics and its affiliates of approximately $10.3 million for these services.
Solid State Storage Solutions LLC. During the second quarter of fiscal year 2007, the Company formed a
venture with third parties that will license intellectual property. This venture qualifies as a variable interest entity
under FIN 46R. The Company is considered the primary beneficiary of this venture, and in accordance with
FIN 46R, the Company consolidates this venture in its financial statements. The venture was financed with
$10.2 million of initial aggregate capital contributions from the partners. In July 2007, Solid State Storage
Solutions LLC invested $10.0 million for the acquisition of intellectual property of which $3.2 million and
$1.8 million was amortized in fiscal years 2008 and 2007, respectively. The venture has an obligation of up to an
additional $32.5 million related to the acquisition of intellectual property should the venture be profitable.
Note 15: Business Acquisitions
msystems Ltd. On November 19, 2006, the Company completed the acquisition of msystems in an all stock
transaction. This combination joined together two flash memory companies with complementary products,
customers and channels. The transaction was accounted for using the purchase method of accounting in
accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), Business Combinations.
The purchase price was comprised of the following (in thousands):
Fair value of SanDisk common stock issued ............................................ $1,365,150
Estimated fair value of options and stock appreciation rights assumed ........................ 115,670
Direct transaction costs ............................................................. 14,918
Total purchase price ............................................................... $1,495,738
As a result of the acquisition, the Company issued approximately 29.4 million shares of SanDisk common
stock based on an exchange ratio of 0.76368 shares of the Company’s common stock for each outstanding share
of msystems common stock as of November 19, 2006. The average market price per share of SanDisk common
stock of $46.48 was based on the average of the closing prices for a range of trading days around the
announcement date (July 30, 2006) of the proposed transaction.
F-46