* COO and co-founder Mehrotra to succeed Harari
* SanDisk Q2 earnings beat expectations
* Shares down 8 pct after hours (Adds additional details and background; updates share price)
SAN FRANCISCO, July 22 (Reuters) - SanDisk Corp (SNDK.O) said its co-founder and Chief Executive, Eli Harari, would retire at the end of this year, and a disappointing outlook helped send the shares of the flash memory supplier tumbling 8 percent.
Harari will be succeeded by President and Chief Operating Officer Sanjay Mehrotra, the company said on Thursday.
Harari, 65, has been SanDisk's only chief executive since it was founded in 1988 and has been the company's public face for more than two decades.
Caris & Co analyst Craig Ellis said the stock sell-off was no surprise given Harari's high standing in the industry and given that his personality has defined SanDisk for so long.
"It's the jitters you have when you have somebody who's been in charge as long as Eli steps away," he said.
Ellis said Mehrotra, who is also a SanDisk co-founder, is not as colorful as Harari, but is well-known. Ellis does not expect any operational changes at SanDisk.
SanDisk's shares have more than doubled over the past year, as the company rode a wave of demand for devices such as smartphones and Apple Inc's (AAPL.O) hot-selling iPad, for which SanDisk supplies flash memory.
"SanDisk is stronger than ever and poised to do even better in the years ahead," Harari said on a conference call with analysts.
Harari has been a major evangelist for the flash industry, forecasting huge growth over the next decade on an upswell in sales for electronics, particularly mobile devices.
"Smartphones will be the new PC, basically. (They) are computers in disguise," Harari said at the Reuters Technology Summit in May. "We basically sell the ammunition. There is a war going on and we sell the bullets." [ID:nN19254271]
Auriga USA analyst Daniel Berenbaum said investors may have been a bit surprised at the timing of Harari's exit, given the executive had been so vocal about strong prospects for the flash industry.
"It seems a little odd that he would be stepping down in front of what he sees as a big cycle," Berenbaum said.
Harari owns 1.4 percent of SanDisk's outstanding stock, according to data compiled by Thomson Reuters, which is valued at nearly $140 million as of market close on Thursday.
The news came as SanDisk released stronger-than-expected second quarter results, with revenue jumping 61 percent to $1.18 billion, beating Wall Street's estimate of $1.16 billion.
Revenue in the quarter was driven by sales to device makers, particularly in the mobile market.
The company said that demand indications for the second half of the year remain strong and SanDisk forecast that flash supply should be constrained.
The company forecast revenue for the current quarter of $1.175 billion to $1.25 billion. That compares with Wall Street's estimate of $1.25 billion.
The company also raised its 2010 revenue forecast to a range of $4.7 billion to $4.9 billion, compared with the consensus analyst estimate of $4.9 billion.
Oppenheimer & Co analyst Gary Hsueh said the company's capacity to build is stretched thin.
"I think people might have been disappointed that, being capacity constrained, the company simply couldn't guide to an ability to hit $5 a share in earnings power," he said.
The company reported net earnings of $257.9 million, or $1.08 a share, in the second quarter ended July 4, compared with $52.5 million, or 23 cents a share, a year ago.
Excluding items, SanDisk earnings per share were $1.08, exceeding analysts' average estimate of 90 cents a share, according to Thomson Reuters I/B/E/S.
Harari will also step down as chairman, but he will provide advisory services for two years, the company said.
Mehrotra will take over on Jan. 1, 2011. SanDisk named Michael Marks to succeed Harari as chairman.
The shares of Milpitas, California-based SanDisk closed at $43.10 and fell to $39.66 in extended trading. (Reporting by Gabriel Madway; editing by Robert MacMillan and Andre Grenon)