SanDisk 2010 Annual Report Download - page 166

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Overview
Fiscal Years Ended
January 2,
2011
%of
Revenue
January 3,
2010
%of
Revenue
December 28,
2008
%of
Revenue
(In thousands, except percentages)
Product revenues ............ $4,462,930 92.5% $ 3,154,314 88.4% $ 2,843,243 84.8%
License and royalty revenues . . . 363,877 7.5% 412,492 11.6% 508,109 15.2%
Total revenues .............. 4,826,807 100.0% 3,566,806 100.0% 3,351,352 100.0%
Cost of product revenues ...... 2,564,717 53.1% 2,282,180 64.0% 3,288,265 98.1%
Gross profit ................. 2,262,090 46.9% 1,284,626 36.0% 63,087 1.9%
Operating expenses
Research and
development .......... 422,562 8.7% 384,158 10.8% 429,949 12.8%
Sales and marketing ...... 209,797 4.4% 208,514 5.8% 328,079 9.8%
General and
administrative ......... 166,485 3.5% 171,359 4.8% 204,765 6.1%
Impairment of goodwill . . . — — — — 845,453 25.2%
Impairment of acquisition-
related intangible
assets ................ — — — — 175,785 5.3%
Amortization of
acquisition-related
intangible assets ....... 1,672 0.0% 1,167 0.0% 17,069 0.5%
Restructuring and other . . . — — 38 0.0% 35,467 1.1%
Total operating expenses ...... 800,516 16.6% 765,236 21.4% 2,036,567 60.8%
Operating income (loss) ....... 1,461,574 30.3% 519,390 14.6% (1,973,480) (58.9)%
Other income (expense), net .... (4,141) (0.1%) (15,589) (0.5)% 21,106 0.6%
Income (loss) before provision
for taxes ................. 1,457,433 30.2% 503,801 14.1% (1,952,374) (58.3)%
Provision for income taxes ..... 157,291 3.3% 88,491 2.5% 34,250 1.0%
Net income (loss) ............ $1,300,142 26.9% $ 415,310 11.6% $(1,986,624) (59.3)%
General
We are the inventor and leading supplier of NAND flash data storage products. Our goal is to provide
simple, reliable, and affordable storage solutions for consumer use in a wide variety of formats and devices. We
sell our products globally to retail and OEM customers.
We design, develop and manufacture data storage solutions in a variety of form factors using our flash
memory, proprietary controller and firmware technologies. We purchase the vast majority of our NAND flash
memory supply requirements through our significant flash venture relationships with Toshiba, which produce
and provide us with leading-edge, low-cost memory wafers. Our removable card products are used in a wide
range of consumer electronics devices such as mobile phones, digital cameras, gaming devices and laptop
computers. Our embedded flash products are used in mobile phones, tablets, eReaders, GPS devices, gaming
systems, imaging devices and computing platforms. For computing platforms, we provide high-speed, high-
capacity storage solutions known as SSDs that can be used in lieu of hard disk drives.
Our strategy is to be an industry-leading supplier of NAND flash storage solutions and to develop large
scale markets for NAND-based storage products. We maintain our technology leadership by investing in
advanced technologies and NAND flash memory fabrication capacity in order to produce leading-edge, low-cost
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