Press Releases

ene 26, 2006

• Revenues $751 million, up 37%; EPS $.68, up 62%
• Operating Profit of $198 million, 26% of revenue
• Ramping 300 millimeter production and 8 Gigabit NAND/MLC chip

SUNNYVALE, CA, January 26, 2006 - SanDisk® Corporation (NASDAQ:SNDK), the world's largest supplier of flash storage card products, today announced results for the fourth quarter ended January 1, 2006.  Fourth quarter revenues increased 37% on a year-over-year basis to a record $751 million and increased 27% compared to the third quarter of 2005.  Fourth quarter net income was $134 million compared to $78 million in the fourth quarter of 2004 and $107 million in the third quarter of 2005.  Fully diluted earnings per share was $0.68, up 62% on a year-over-year basis and up 24% compared to the third quarter of 2005.

Total revenue for fiscal 2005 was $2.3 billion, up 30% from $1.8 billion in 2004.  Product revenues were $2.1 billion, up 29% from $1.6 billion in 2004.  License and royalty revenues were $239 million, up 37% from $174 million in 2004.  Net income was $386 million, up 45% from net income of $267 million in 2004.  Fully diluted earnings per share for fiscal 2005 was $2.00, compared to $1.44 in 2004.

"The fourth quarter was a strong finish to a great year for SanDisk.  We sold approximately 11 million mobile cards primarily into OEM bundles in camera-phones and music-centric phones, and we are seeing exceptionally broad acceptance of our microSD™ format in new handsets from the top tier OEMs.  We sold more than a million Flash MP3 players in the fourth quarter, gaining a clear number two share in the highly competitive U.S. retail market, indicative of the growing recognition among consumers of the SanDisk brand, and driven by our strong retail sales organization, which surpassed the 150,000 storefront milestone during the quarter," said Eli Harari, SanDisk CEO.

"We are optimistic about our business outlook and our competitiveness in 2006 and expect this to be a year of continuing strong growth in demand in our target markets as well as a competitive landscape that is characteristic of rapidly growing consumer mass-markets.  We expect a seasonally soft first quarter in retail partially offset by continuing strength in our OEM handset business.  To stimulate demand and accelerate consumers' move to gigabyte capacities in 2006, we are taking significant pricing actions in the first quarter that are made possible for us through the significantly lower costs achieved as we ramp production at the Flash Partners' Fab 3 and as we continue to increase output of our 8 gigabit chip."

Financial Results 

• Product revenue was a record $683 million in the fourth quarter, up 35% year-over-year and 29% sequentially.
• Revenue from license and royalties was $67 million, up 63% year-over-year and 12% sequentially.   
• Megabytes sold in the fourth quarter increased 122% year-over-year and 49% from the third quarter of 2005.  Total megabytes sold in 2005 was 166% higher than in 2004.
• Average density per card sold in retail was 555 megabytes, up 64% from the fourth quarter of 2004 and up 8% sequentially.
• Average price per megabyte sold declined 13% sequentially and 39% from the fourth quarter of 2004.  Total average price per megabyte sold in 2005 declined 52% from 2004.
• Total gross margin was 40% of revenues compared to 37% in the fourth quarter of 2004 and 44% in the third quarter of 2005.  Total gross margin in 2005 increased 3.6 points from 2004.
• Product gross margin was 34.4% compared to 32.0% in the fourth quarter of 2004 and 37.2% in the third quarter of 2005.  Product gross margin in 2005 was 35.5% compared to 31.9% in 2004. 
• In the fourth quarter, one quarter ahead of our previous forecast, Fab 3 300 millimeter 4 gigabit NAND/MLC 90 nanometer production achieved lower die cost than the corresponding 4 gigabit die manufactured in high volumes on our mature 200 millimeter production line.
• Operating income was a record $198 million and 26% of revenue compared to $126 million and 23% of revenue in the fourth quarter of 2004 and $159 million and 27% of revenue in the third quarter of 2005.  Operating income for 2005 was $577 million and 25% of revenue, up from $419 million and 24% of revenue in 2004.  
• Net income was $134 million compared to $78 million in the fourth quarter of 2004 and $107 million in the third quarter of 2005.
• Cash flow from operations for 2005 was $481 million compared to $228 million in 2004 and total cash and short-term investments increased to $1.7 billion.

Other Recent Highlights

• SanDisk completed the acquisition of Matrix® Semiconductor, Inc., a privately-held company with strong IP in 3D memory technology.
• SanDisk announced the new flagship Sansa™ e200 MP3 player in capacities ranging from 2 gigabyte (GB) to 6GB, with a sleek design, color screen and microSD card expansion slot.  The feature-rich, value-priced Sansa c100 models were also recently introduced in 1 and 2GB capacities.
• Mobile cards continued to proliferate and SanDisk announced a 1GB capacity microSD™ card and 2GB capacity miniSD™ card.
• SanDisk announced the addition of U3™ smart drive functionality to its award winning line of Cruzer® USB flash drives.
• SanDisk appointed two new board members: Steven J. Gomo, current Executive Vice President, Finance and CFO at Network Appliance, Inc. and Eddy W. Hartenstein, previous Chairman and Chief Executive Officer of DirecTV, Inc.

Scheduled Interviews
SanDisk Corporation President and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC's "Squawk Box", January 27, 2006 at approximately 4:50 a.m. PST.  Judy Bruner, SanDisk's Executive Vice President, Administration and CFO is scheduled to appear on Bloomberg TV's "Market Line", January 27, 2006 at approximately 9:39 a.m. PST.

Conference Call
SanDisk's fourth quarter 2005 conference call is scheduled for 2:00 p.m. PST, Thursday, January 26, 2006.  The conference call will be web cast by CCBN and can be accessed live, and throughout the quarter, at SanDisk's website at www.sandisk.com/IR and at www.streetevents.com for registered streetevents.com users.  To participate in the call via telephone, the dial in number is (913) 981-4911.  The call will also be available by telephone replay through Monday, January 30, 2006, by dialing (719) 457-0820 and entering the pass code 3142125.  A copy of this press release will be filed with the Securities and Exchange Commission on a current report on Form 8-K and will be posted to our website prior to the conference call.

Forward-Looking Statements
This news release contains certain forward-looking statements, including statements about our business outlook for the first quarter and fiscal year 2006,  market supply and demand, expected continued strength in the handset market and continued intense competition in our markets, and scheduled appearances by our CEO and CFO that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations.  Risks that may cause these forward-looking statements to be inaccurate include among others: slower than expected growth in market demand for our products or a slower adoption rate for these products in current and new markets that we are targeting, any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us, decreased availability of test and assembly capacity and increased prices for such services,  slower than expected expansion of our global sales channels, fluctuations in operating results, unexpected yield variances and longer than expected low yields and other possible delays related to our conversion to 70-nanometer NAND flash technology or the ramp-up of the 300-millimeter flash fabrication facility, unexpected delays in the ramp-up of volume production of our new 70-nanometer 8 gigabit NAND/MLC chip, our inability to make additional planned smaller geometry conversions in a timely manner, future average selling price erosion that may be more severe than our expectations due to decreased demand or possible excess industry capacity of flash memory from ourselves as well as from existing suppliers or from new competitors that are planning to aggressively increase supply in 2006, price increases from non-captive flash memory sources and third-party subcontractors, higher than expected operating expenses, higher than anticipated capital equipment expenditures, adverse global economic and geo-political conditions, including adverse currency exchange rates and acts of terror, the timely development, internal qualification and customer acceptance of new products that are based on 70-nanometer NAND technology, fluctuations in license and royalty revenues, business interruption due to earthquakes, hurricanes, pandemics or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products, potential impact of high energy prices and other global events outside of our control which could adversely impact consumer confidence and hence reduce demand for our products, scheduled appearances by our executives could be cancelled or delayed by us or the network, and the other risks detailed from time-to-time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10-K for the year ended January 2, 2005 and our quarterly reports on Form 10-Q.  Future results may differ materially from those previously reported.  We do not intend to update the information contained in this release.

About SanDisk  
SanDisk is the original inventor of flash storage cards and is the world's largest supplier of flash data storage card products using its patented, high-density flash memory and controller technology.  SanDisk is headquartered in Sunnyvale, CA and has operations worldwide, with more than half its sales outside the U.S.

www.sandisk.com

SanDisk, Cruzer and Matrix are trademarks of SanDisk Corporation, registered in the United States and other countries. SanDisk Corporation is an authorized licensee of the SD trademark. U3 is a trademark of U3, LLC.

SanDisk's web site/home page address: http://www.sandisk.com

Contact:
Investor Contact:
Lori Barker Padon
(408) 542-0585

Media Contact:
Mike Wong
(408) 548-0223