SanDisk 2011 Annual Report Download - page 85

This is a TAB type table. Insert
conts here. Annual Report
Kingston, Lexar, PNY and Verbatim. We sell flash memory in the form of white label cards, wafers or
components to certain companies who sell flash products that may ultimately compete with our branded products
in the retail or OEM channels. This could harm our branded market share and reduce our sales and profits.
Client Storage Solution Manufacturers. In the market for client SSDs, we face competition from large
NAND flash producers such as Intel, Micron, Samsung and Toshiba, who have established relationships with
computer manufacturers. We also face competition from third-party SSD solution providers such as Kingston
and OCZ.
Enterprise Storage Solution Manufacturers. With the acquisition of Pliant, we now compete in the
enterprise storage solutions market where we face competition from companies such as Fusion-io, Intel, Micron,
Samsung, STEC and Toshiba.
We believe that our ability to compete successfully depends on a number of factors, including:
• price, quality and on-time delivery of products;
• product performance, availability and differentiation;
• success in developing new applications and new market segments;
• sufficient availability of cost-efficient supply;
• efficiency of production;
• ownership and monetization of IP rights;
• timing of new product announcements or introductions;
• the development of industry standards and formats;
• the number and nature of competitors in a given market; and
• general market and economic conditions.
There can be no assurance that we will be able to compete successfully in the future.
Our enterprise storage solutions business is characterized by sales to a limited number of customers with
long design, qualification and sales cycles and customers/products that do not lend themselves to the same rapid
technology transitions as our other products. The enterprise storage solutions market is comprised of a relatively
limited number of customers, with long design, qualification and test cycles prior to sales. Enterprise sales cycles
can be long and unpredictable, and require considerable time and expense. For example, we may be required to
customize our product to interoperate with an OEM’s product, which could further lengthen the sales cycle. The
length of our sales cycle in this market makes us susceptible to the risk of delays or termination of orders if these
customers decide to delay orders or use a different supplier. We may need to spend substantial time, money and
other resources in our sales process without any assurance that our efforts will produce any sales. As a result of
this lengthy and uncertain sales cycle, it is difficult for us to predict when customers may qualify and purchase
products from us and as a result, our operating results may vary significantly and may be harmed. There can be
no assurance that we will be able to accurately predict demand for these products in the future. The difficulty in
forecasting demand also increases the difficulty in anticipating our inventory requirements, which may cause us
to over-produce finished goods, resulting in inventory write-offs, or under-produce finished goods, harming our
ability to meet customer requirements and generate sales. Due to long customer product cycles, we may not be
able to benefit from the rapid technology transitions that drive cost reductions in our consumer-based products
and this may lead to variability in our product gross margins. In addition, our enterprise storage solutions
products have been qualified with customers utilizing non-captive memory. If we are unable to obtain sufficient
or cost effective non-captive memory prior to qualifying these products with our captive memory, we may be
unable to maintain or grow our revenue or margins from these products.
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