SanDisk 2009 Annual Report Download - page 68

ITEM 1A. RISK FACTORS
Our operating results may fluctuate significantly, which may adversely affect our financial condition and
our stock price. Our quarterly and annual operating results have fluctuated significantly in the past and we expect
that they will continue to fluctuate in the future. Our results of operations are subject to fluctuations and other
risks, including, among others:
• competitive pricing pressures, resulting in lower average selling prices and lower or negative product
gross margins;
• expansion of supply from existing competitors and ourselves creating excess market supply, causing
our average selling prices to decline faster than our costs;
• unpredictable or changing demand for our products, particularly for certain form factors or capacities;
• excess captive memory output or capacity which could result in write-downs for excess inventory, the
application of lower of cost or market charges, fixed costs associated with under-utilized capacity, or
other consequences;
• inability to maintain or grow sales through our new channels to which we are selling private label
products, wafers and components or potential loss of branded product sales as a result;
• insufficient non-memory materials or capacity from our suppliers and contract manufacturers to meet
demand; or increases in cost of non-memory materials or capacity;
• price increases which could result in lower unit and gigabyte demand, potentially leading to reduced
revenue and/or excess inventory;
• less than anticipated demand, including a general economic weakness in our markets;
• insufficient supply from captive flash memory sources and inability to obtain non-captive flash
memory supply in the time frame necessary to meet demand;
• increased purchases of non-captive flash memory, which typically cost more than captive flash
memory and may be of less consistent quality;
• increased memory component and other costs as a result of currency exchange rate fluctuations to the
U.S. dollar, particularly with respect to the Japanese yen;
• inability to adequately invest in future technologies and products while controlling operating expenses;
• our license and royalty revenues may fluctuate or decline significantly in the future due to license
agreement renewals, non-renewals or if licensees fail to perform on a portion or all of their contractual
obligations;
• inability to develop or unexpected difficulties or delays in developing, manufacturing with acceptable
yields, or ramping, new technologies such as 32-nanometer or next generation process technology,
3-bits and 4-bits per cell NAND memory architecture, 3-Dimensional Read/Write, or 3D Read/Write,
or other advanced, alternative technologies;
• insufficient assembly and test capacity from our Shanghai facility or our contract manufacturers or
disruptions in operations at any of these facilities;
• difficulty in forecasting and managing inventory levels due to noncancelable contractual obligations to
purchase materials, such as custom non-memory materials, and the need to build finished product in
advance of customer purchase orders;
• timing, volume and cost of wafer production from Flash Ventures as impacted by fab start-up delays
and costs, technology transitions, yields or production interruptions;
• disruption in the manufacturing operations of suppliers, including suppliers of sole-sourced
components;
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