SanDisk 2012 Annual Report Download - page 6

From a manufacturing perspective, our solid execution in the 19-nanometer technology transition helped lower
product costs at a healthy rate, and 19-nanometer technology accounted for the majority of our production output
in 2012.
Despite 2012 being a year of mixed business trends, we delivered revenue of $5.05 billion, with GAAP earnings
of $1.70 per share. Our business generated $530 million in operating cash flow and our cash balance increased by
approximately $100 million over the course of 2012, after investing in property, plant & equipment and
acquisitions, as well as spending approximately $230 million on share repurchases.
Expanding Horizons
Smartphones and tablets are becoming increasingly powerful. As an increasing number of these devices use
multi-core processors, these products are beginning to perform many of the functions of a traditional personal
computer. Additionally, the convergence of smartphones and tablets is giving rise to newer categories of mobile
devices, such as the Samsung Galaxy Note, LG Optimus and Sony Experia Z, that are even more capable than
traditional smartphones. These new products require robust and high-performance storage solutions with
requirements that play to the strengths and key capabilities of SanDisk NAND-flash memory offerings.
Specifically, providing impressive power and performance characteristics in various form factors requires deep
system design and integration capabilities, and these are part of SanDisk’s core competencies. I am pleased to
note that all key smartphone and tablet manufacturers use SanDisk products.
The computing and storage markets are experiencing unprecedented changes. The traditional mechanical hard
disk drive (HDD) in a personal computer is either being displaced by a stand-alone SSD or being complemented
with a flash-based solution. With the addition of flash-based technology in these devices, consumers are now
able to experience a near instantaneous “wake-up” of their devices the moment the power is turned on. Because
of flash memory, computer users are also enjoying faster application responsiveness, longer battery life, less
weight and greater durability. Our client SSDs are increasingly being designed into many notebook computers to
enable these features. I am proud to say that our client SSD business has achieved solid traction and ten leading
PC OEMs are leveraging our client SSD solutions to bring innovative products to market.
In the enterprise SSD market, cloud-based offerings as well as enterprise data centers are presenting tremendous
opportunities for the use of SSDs. Users of cloud storage and applications expect instantaneous access to data via
high-speed connections, and enterprise SSDs enable reliable storage and quick delivery of this information. We
have had very good success with our second-generation SAS drives as more storage system configurations are
being implemented with this technology along side or in-lieu of existing hard disk drives. We believe we are one
of the top 2 suppliers of SAS SSDs to storage OEMs. Our SAS drives incorporate a proprietary multi-core
controller chip and a sophisticated firmware stack, the combination providing highly differentiated performance
characteristics that benefit our enterprise customers. For the PCIe market, we are supplying our first-generation
SSD, focused on small and medium business applications, and we expect to launch our next generation, higher-
performance PCIe SSD later in 2013. We are now supplying our enterprise SSDs to four of the seven tier one
enterprise storage OEMs.
In 2012, we made two software related acquisitions, FlashSoft and Schooner, to further enhance our enterprise
SSD capabilities. The FlashSoft team designs and develops high-performance data caching solutions that
significantly boost the input-output speed of data traversing through the SSDs. The Schooner team’s offerings are
designed to accelerate the performance of enterprise application software such as databases. Our SSD software
solutions are designed to improve infrastructure performance and availability and also lower overall data center
cost. We expect that our investment in software will enhance our SSD solutions in the years ahead.
Our position in retail remains solid with global market share leadership, supported by a well-segmented product
line made available across more than 250,000 storefronts worldwide. SanDisk products, known for their quality
and reliability, continue to command a price premium over competition in retail. SanDisk’s retail presence is a
key differentiating aspect of our company.