UPDATE 3-SanDisk revenue outlook fails to inspire, sees lower chip price

Wed Jan 22, 2014 7:31pm EST

(Adds outlook, CFO comment, gross margin estimates)

By Noel Randewich

SAN FRANCISCO Jan 22 (Reuters) - SanDisk Corp posted higher fourth-quarter profits but gave a revenue outlook that fell short of some analysts' expectations and said memory chip prices would fall more this year than in 2013.

The stock rose modestly after the results were released, but turned lower after Chief Financial Officer Judy Bruner warned about weaker chip prices during a conference call with analysts.

"There was probably, at least for parts of last year, a little bit more undersupply, meaning that prices were a little bit firmer," Bruner said in an interview. "In a balanced environment, we expect that there would be a little more price decline in the industry in '14 relative to '13."

She said she expects average selling prices for SanDisk's chips to decline less than its rivals' chips because SanDisk is shifting toward more value-added products.

SanDisk, which sells NAND chips to device makers of smartphones, cameras and other mobile devices, is increasingly selling its own branded solid-state drives, made with its chips, directly to companies and consumers.

While they remain significantly more expensive than mechanical hard drives, solid-state drives, or SSDs, are gaining popularity in data centers and consumer laptops due to their increased efficiency.

"SSDs are becoming a bigger proportion of the company, which means less volatility in earnings," said Pacific Crest analyst Monika Garg. "They're moving up the value chain."

Riding an industry recovery in NAND prices, SanDisk's shares have surged 50 percent in the past year, compared to a 24 percent increase in the Standard & Poor's 500 index.

The Milpitas, California-based company posted fourth-quarter revenue of $1.73 billion, up 12 percent from the year-ago quarter. Analysts on average had expected $1.703 billion, according to Thomson Reuters I/B/E/S.

SanDisk expects revenue of $1.45 billion to $1.52 billion for the first quarter, and $6.4 billion to $6.8 billion for the full year, she said.

Net income in the fourth quarter rose to $338 million, or $1.45 per share, from $214 million, or 87 cents per share, a year earlier.

Excluding one-time items, earnings were $1.71 per share. That was better than the $1.58 expected by analysts.

It estimated non-GAAP gross margins of 47 to 49 percent in the first quarter, and 45 to 48 percent for all of 2014.

Analysts expected gross margins of 48 percent for the first quarter and 47 percent for 2014.

Shares of SanDisk were down 0.66 percent in extended trade after closing up 0.42 percent at $72.19 on Nasdaq. (Reporting by Noel Randewich; Editing by Richard Chang)

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