(Adds comment from CFO and analyst, revenue outlook)
By Noel Randewich
SAN FRANCISCO, April 16 SanDisk Corp
increased its outlook for gross margins in 2014 as fast-growing
sales of its high-end solid-state drives helped offset volatile
prices for memory chips.
Shares of SanDisk rose more than 6 percent in after-hours
trade on Wednesday after the chipmaker said that, because of an
improved product mix, it was increasing its 2014 gross margin
target range to between 47 percent and 49 percent. Its previous
target range was 45 percent to 48 percent.
SanDisk's NAND memory chips are widely used in smartphones,
cameras and other mobile devices to store music, pictures and
other data. Increasingly the company is using its chips to build
and sell its own solid-state drives directly to companies and
Revenue from solid-state drives, or SSDs, increased 61
percent, to account for 28 percent of revenue in the first
quarter, SanDisk said.
"We anticipate that enterprise SSDs will be our
fastest-growing product category in 2014," Chief Executive
Sanjay Mehrotra said on a conference call with analysts.
The SSD business is growing so fast that SanDisk, which is
already known by consumers for its microSD cards and other
retail devices, is well on its way to becoming more of a storage
company than a chipmaker, said RBC analyst Doug Freedman.
"And not just a storage company, but a high-quality storage
company," Freedman said. "There's a real differentiation in the
market that is showing up between high-quality products and
'just ship it because somebody will use it.'"
SanDisk's solid-state drive business offers higher profit
margins than does sales of NAND chips to other manufacturers. It
also makes the company less vulnerable to dramatic price swings
that have historically plagued the memory chip industry.
While they remain significantly more expensive than
mechanical hard drives, solid-state drives are gaining
popularity in data centers and consumer laptops because of their
Prices for solid-state drives have come down in the last
couple of years, and Chief Financial Officer Judy Bruner in an
interview the devices are now being adopted not just by
cutting-edge data centers but by the IT departments of more
traditional companies across the economy.
"If you go back several years, it took a bit longer than
some had thought, but (laptop) and enterprise SSDs are growing
very quickly," Bruner said.
SanDisk said first-quarter revenue was $1.51 billion, up 13
percent from the year-ago period. Analysts on average expected
$1.49 billion, according to Thomson Reuters I/B/E/S.
Net income in the first quarter rose to $269 million, or
$1.14 per share, from $166 million, or 68 cents per share, a
Excluding one-time items, SanDisk earned $1.44 per share,
higher than the $1.26 expected by analysts.
For the second quarter, SanDisk expects revenue of $1.550
billion to $1.625 billion. Analysts expect $1.583 billion.
Shares of SanDisk were up 6.20 percent in extended trade
after closing up 0.68 percent at $75.85 on the Nasdaq.
(Reporting by Noel Randewich; Editing by Steve Orlofsky and