SanDisk 2011 Annual Report Download - page 104

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 intend to maintain our technology leadership by investing
in advanced technologies and NAND flash memory fabrication capacity in order to produce leading-edge,
low-cost NAND flash memory for use in a variety of end-products, including consumer, mobile phone and
computing devices. We are a one-stop-shop for our retail and OEM customers, selling in high volumes all major
NAND flash storage card formats for our target markets.
Our results are primarily driven by worldwide demand for flash storage devices, which in turn primarily
depends on demand for consumer electronic products and for SSDs in computing devices and enterprise storage
systems. We believe the markets for flash storage are generally price elastic, meaning that a decrease in the price
per gigabyte results in increased demand for higher capacities and the emergence of new applications for flash
storage. Accordingly, we expect that as we reduce the price of our flash devices, consumers will demand an
increasing number of gigabytes and/or units of memory and that over time, new markets will emerge. In order to
profitably capitalize on this price elasticity, we must reduce our cost per gigabyte at a rate similar to the decrease
in selling price per gigabyte, while at the same time increasing the average capacity and/or the number of product
units enough to offset price declines. We continually seek to achieve these cost reductions through technology
improvements, primarily by increasing the amount of memory stored in a given area of silicon.
Our industry is characterized by rapid technology transitions. Since our inception, we have been able to
scale NAND flash technology through fifteen generations over approximately twenty-two years. However, the
pace at which NAND flash technology is transitioning to new generations is expected to slow due to inherent
physical technology limitations. We currently expect to be able to continue to scale our NAND flash technology
through a few additional generations, but beyond that there is no certainty that further technology scaling can be
achieved cost-effectively with the current NAND flash technology and architecture. We also continue to invest in
future alternative technologies, including our 3D ReRAM technology, which we believe may be a viable
alternative to NAND flash technology, when NAND flash technology can no longer scale at a sufficient rate, or
at all. In the first quarter of fiscal year 2011, we made investments in BiCS and other technologies. We believe
BiCS technology, if successful, could enable further memory cost reductions beyond the NAND roadmap.
However, even when NAND flash technology can no longer be further scaled, we expect NAND flash
technology and potential alternative technologies to coexist for an extended period of time.
Fiscal Year 2011 Developments and Transactions
On May 24, 2011, we completed the acquisition of Pliant, a developer of enterprise flash storage solutions.
This acquisition represents a significant opportunity for us to participate in the enterprise storage solutions
market. We acquired all of the outstanding shares of Pliant through an all-cash transaction. The total purchase
price was $322 million. Total acquisition-related costs of approximately $2 million were expensed during the
year ended January 1, 2012.
In the third quarter of fiscal year 2011, we repurchased $222 million principal amount of our 1% Notes due
2013 for $211 million in cash.
Fiscal years 2011 and 2010 included 52 weeks as compared to 53 weeks in fiscal year 2009.
Critical Accounting Policies & Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
Consolidated Financial Statements, which have been prepared in accordance with U.S. Generally Accepted
Accounting Principles, or GAAP.
Use of Estimates. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, we evaluate our estimates, including, among others, those related to customer
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