October 20, 2009 / 8:28 PM / 10 years ago

UPDATE 3-SanDisk results easily top estimates, shares jump

* Q3 EPS ex-items 75 cents vs Street view 26 cents

* Q3 rev $935.2 mln vs Street view $787.9 mln

* Sees Q4 rev $1.1-$1.2 bln

* Shares surge nearly 10 percent after hours (Adds forecast, CEO and analyst comments, background, byline)

By Gabriel Madway

SAN FRANCISCO, Oct 20 (Reuters) - U.S. flash memory maker SanDisk Corp SNDK.O posted much better-than-expected sales and profit on strong demand in the mobile phone market, sending its shares up nearly 10 percent on Tuesday.

The company said the third-quarter results reflected major gains in orders from equipment makers that are continuing into the current quarter.

SanDisk forecast fourth-quarter revenue of $1.1 billion to $1.2 billion, well ahead of the consensus analyst estimate of $857.7 million.

NAND flash memory is found in any number of consumer electronics products, including smartphones, gaming devices and digital music players. SanDisk sells flash memory to original equipment manufacturers (OEMs), and also sells memory cards at retail.

“Our decision late last year to participate more aggressively in the OEM space began to pay off in the third quarter,” Chief Executive Eli Harari said on a conference call with analysts.

The OEM channel represented 56 percent of the company’s revenue, up from 41 percent from the previous quarter. Meanwhile, retail sales were flat sequentially.

Needham & Co analyst Edwin Mok said the company appears to be selling a wider array of products to equipment makers.

“They have talked about going after the OEM business, but the strong numbers from the last quarter and in some ways the guidance are driven mostly by the fact that they’ve taken more aggressive steps.”

The mobile phone market remained a key growth driver, SanDisk said, accounting for 38 percent of revenue.

The NAND industry was stung earlier in the year by oversupply and weaker demand for consumer electronics. SanDisk shares have more than doubled this year as balance has returned.

Harari said he expects NAND supply and demand to be in “reasonably” good balance in 2010.

BEATS STREET

The company said it swung to a net profit of $231.3 million, or 99 cents a share, in its third quarter ended Sept. 27, from a net loss of of $165.9 million, or 74 cents a share, in the year-ago period.

Excluding items, the company earned 75 cents a share, beating the average analyst estimate of 26 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 14 percent to $935 million, well ahead of Wall Street’s forecast of $787.9 million.

Product gross margin of 39 percent was better than expected, helped by favorable pricing and strong cost reductions, the company said.

The company said total units sold in the September quarter rose 45 percent from the previous quarter, while the average price per gigabyte sold slipped 3 percent.

The shares of Milpitas, California-based SanDisk closed at $21.48 on Nasdaq and rose to $23.59 in extended trading. (Reporting by Gabriel Madway; editing by Phil Berlowitz, Andre Grenon and Richard Chang)

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