SanDisk Corp. ( SNDK ) reported
first-quarter 2013 adjusted earnings of 78 cents per share,
surpassing the Zacks Consensus Estimate of 70 cents. Adjusted or
non-GAAP earnings per share exclude amortization of
acquisition-related intangible assets, convertible debt interest
and tax gains but include stock-based compensation expense. Results
also came 35.5% higher than the year-ago period but were 21.3%
below the prior quarter level.LINKEDIN CORP-A (LNKD): Free Stock Analysis
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The beat was mainly attributable to strong solid state drive (SSD)
sales and strength in retail businesses and favorable supply/demand
metrics. Share price tumbled 3.08% in the day's trade but was up
1.31% in after-hours trading.
Total revenue for the first quarter was $1.34 billion, up 11.2% on
a year-over-year basis but down 13.0% from the previous quarter.
The quarter's result surpassed both the company's guidance as well
as the Zacks Consensus Estimate of $1.32 billion. The
year-over-year revenue improvement was mainly due to strong
performances in both the OEM (original equipment manufacturer) and
Retail verticals. Petabytes sales were up 36.0%, partially offset
by lower pricing. Sequential decline in revenues was mainly due to
seasonality, which was at par with management's outlook provided
during fourth quarter 2012.
Within OEM, sales of SSD grew 200.0%, while sales of mobile
embedded solutions improved by double digits. Sales from Retail
vertical witnessed 4.0% year-over-year growth.
During the quarter, SanDisk started shipment of 19-nanometer (nm)
SSDs to its retail customers. The company plans to ship the 19 nm
SSDs to its OEM customers shortly.
Reported gross margin in the quarter was 39.6%, up from 34.5% in
the year-ago quarter. The year-over-year margin growth was due to
lower bit cost partially offset by price declines.
Operating margin was 18.9% versus 15.9% in the year-ago quarter.
The company's total operating expenses increased 23.6% on a
year-over-year basis. Higher operating expenses were mainly due to
21.4%, 20.6% and 38.4% year-over-year increases in research and
development expenses, selling and general expenses and general and
administrative expenses, respectively.
Net income on a GAAP basis was $166.2 million or 68 cents per
share compared with $114.4 million or 46 cents in the year-ago
Excluding the amortization of acquisition-related intangible
assets, convertible debt interest expense and related tax
adjustments but including stock-based compensation expense,
non-GAAP net income for the first quarter was $191.5 million or 78
cents per share compared with $142.2 million or 58 cents in the
Balance Sheet & Cash Flow
SanDisk generated $473.7 million in cash from operating activities
compared with $315.6 million in the prior quarter. Capital
expenditure was $3.8 million. Cash and short-term investments were
$3.31 billion versus $2.88 billion in the previous quarter.
Long-term marketable securities were $2.88 billion. Convertible
debt for the quarter was $1.72 billion, up from $1.70 billion in
the previous quarter.
SanDisk repurchased 1.76 million of common stock for $50.97 each,
amounting to $90.0 million.
Management is positive about SSD revenue growth, favorable product
mix (retail and OEM) and better supply/demand metrics in 2013. The
company also stated that it will cap wafer capacity addition to
keep the supply level restricted. This will boost pricing. SanDisk
also expects a ramp in the demand for its latest 19-nm
Apart from this, SanDisk is planning to focus more on iNAND
technology as this is going to be a driver for its mobile-embedded
products. It expects the launch of several new smartphones and
tablets, Ultrabooks and other end-client PCs running on SSDs. This
will boost demand for NAND flash gadgets aka SSD.
The company also expects its total SSD contribution to be roughly
25.0% of total revenue moving into 2014.
SanDisk now expects second quarter revenues to be within
$1.35-$1.40 billion. Management stated that the revenue guidance is
conservative, reflecting modest sequential decline in SSD revenues
due to seasonality. For fiscal 2013, SanDisk expects revenues in
the range of $5.60-$5.75 billion (previously $5.30-$5.60
For the second quarter, the company expects non-GAAP gross margin
of 41.0%-43.0%. Non-GAAP operating expenses will be roughly $260.0
million for the second quarter, which reflects continued
investments. The tax rate is projected at approximately 32.0% on a
For fiscal 2013, non-GAAP gross margin is expected to be
42.0%-44.0% (previously 39.0%-43.0%). Gross margin expansion
reflects decent pricing environment and a weaker yen during the
second half. Non-GAAP operating expenses will be roughly $1.05
billion (reiterated). The tax rate is projected at approximately
32.0% (previously 30.5%) on a non-GAAP basis.
The Zacks Consensus Estimate for second quarter and fiscal 2013
are pegged at 83 cents and $3.52 per share, respectively.
SanDisk posted solid first-quarter results with both its top and
bottom lines surpassing the Zacks Consensus Estimates. Though the
results came below the prior quarter levels, the year-over-year
comps were better than expected. Revenues from OEMs and Retail were
strong, aided by higher mobile embedded and SSD sales. Fiscal 2013
guidance was encouraging too, citing restricted price
Though lackluster PC sales, European issues, competition from
Micron Technology Inc. ( MU ) and currency
fluctuations could hurt the fundamentals a bit, we remain overtly
positive on management's commentary of a turnaround story in the
coming quarter and beyond and strong secular demand for NAND
Currently, SanDisk holds a Zacks Rank #1 (Strong Buy). Apart from
SanDisk, we also expect earnings beat from the following
Lattice Semiconductor Corp. ( LSCC ), Earnings ESP
of +100.0% and a Zacks Rank #1 (Strong Buy).
LinkedIn Corp. ( LNKD ), Earnings ESP
of +300.0% and a Zacks Rank #3 (Hold).