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Plummeting SanDisk snaps awake, pulls hard on the control stick

Whoop-whoop! Pull up! Pull up!

After a terrible first quarter of the year, SanDisk revenues continued to fall in its second quarter, which has just ended. However, profits went up sharply, giving hope that a turnaround at the wannabe enterprise flash storage supplier is under way.

SanDisk_Q2_2015

SanDisk financials ... Click image to increase its size

The numbers tell the story. Revenues of $1.24bn for the year's second quarter were 24 per cent down on a year ago, and 7 per cent lower than the dreadful Q1's $1.33bn. Seasonally the second quarter should be higher than the first quarter, as the chart shows; but not this time around.

Profits of $81m were also sharply down on the annual compare – by 70 per cent – but unexpectedly up sequentially by three digits at 108 per cent. That's impressive as it's against sequentially down revenues. Management clung to that like a drowning man to a lifebelt, and why not – they'd done good.

SanDisk CEO Sanjay Mehrotra fetched this from the quote cannery: "Our second quarter results benefited from more favorable performance than expected in enterprise and retail. We are also making good progress in strengthening our product roadmap and customer engagements. For the second half of 2015, we expect the industry environment to remain stable and look forward to delivering sequential revenue and profit growth as we continue to make progress in enhancing our execution."

"In retail we have made progress, recovering from our temporary share loss experienced in Q4'14 and Q1'15, which was due to the supply constraints we discussed in earlier calls. Overall, retail had a good second quarter driven by demand for imaging cards and SSDs."

CFO Judy Bruner revealed that "our client SSD revenue declined as expected due to the end of life during Q1 of a program with a major customer."

Stifel MD Aaron Rakers writes, "enterprise SSD revenue was reported at ~14 per cent of revenue, or ~$173M, down from ~$186.5M in the prior quarter, but up from ~$131M in the year ago quarter (yr. ago excluding Fusion-io acquisition)." It looks to us as if retail sales basically rescued the show.

Various revelations were made about the roadmap:

  • SanDisk began equipment purchases to support the commencement of the pilot production of 48-layer 3D NAND in 2H 2015; output will be for product samples in 2015. (Samsung has a 32-layer product.)
  • It expects 3D NAND sales to begin in 2016.
  • It expects to use 3D NAND initially in high-capacity removable product, then client SSDs and embedded products, followed by enterprise SSD product – which could mean 2017 for enterprise 3D NAND product availability.
  • SanDisk plans to begin addressing the NVMe PCIe market opportunity with a new offering available for qualification in mid-2016.
  • He said SanDisk is developing "our next generation 15 nanometer-based 12 Gbit/s SAS SSD with higher capacity and performance, and expect to introduce that solution to market in 2016 with revenue contribution starting in late 2016."

Then he pulled back the cloak on this:

We are excited about the progress we are making with our next generation converged platform for enterprise products, which brings the best technologies and IP together from our various acquisitions. This converged platform will be heavily leveraged across multiple product families in the enterprise segment, and allows us to offer market-leading products integrated with our next generation 3D NAND memories. Given the long engineering development cycle typically associated with such major programs, we expect to start sampling products based on this new architecture in 2017. While we expect to continue to grow our enterprise revenue over the next couple of years, we aim to rapidly increase our market momentum once this converged architecture is introduced into volume production."

A couple of other snippets:

  • "We expect SSDs will rapidly replace HDDs in laptops and desktops." No surprise there. Rakers writes, "SanDisk expects to see 40 per cent attach rate in commercial notebooks by the end of 2015."
  • "As the automotive industry marches towards a future that will include autonomous driving, storage requirements will grow immensely and we expect to be a leading provider of innovative solutions to this industry."

He's hopeful about flash being used in Internet of Things sensor gear, but nothing big enough to shout about has happened yet.

Mehrotra wasn't worried about flash foundry partner Toshiba's top execs falling on their swords over a profit mis-statement accounting scandal. "Some of you may be wondering about the Toshiba announcements from yesterday – while there is some change to the management structure of Toshiba's semiconductor business, we continue to believe that this will not impact the strategy, investments, and execution of the joint venture, and that NAND remains a high priority for Toshiba."

Rakers noted that SanDisk doesn't see 3D NAND lowering its NAND product costs that much, writing, "Regarding the cost competitiveness of 3D NAND (in general for the industry as well as for itself), SanDisk reiterated that its 15nm planar is the lowest cost node in the industry (including 3D NAND nodes from other vendors) and that 15nm planar will continue to account for the vast majority of SanDisk's bit production in 2016."

Basically SanDisk is getting its business back to a sensible state and says things will carry on getting better across the board. But there is no 3D NAND white knight, to boost sales and profits, waiting in the wings just yet. ®

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