February 24, 2011 / 9:13 PM / in 7 years

UPDATE 1-SanDisk voices confidence on 2011 forecast

* Optimistic that 2011 results in upper half of forecast

* Supply growth moderating -SanDisk CEO

* Balance seen in 2011 after two years of supply shortages (Adds forecast, updates shares)

By Gabriel Madway

SAN FRANCISCO, Feb 24 (Reuters) - Flash memory supplier SanDisk Corp SNDK.O said healthy trends in the industry give the company optimism that its revenue and gross margin for 2011 will land in the upper half of its previously forecasted range.

“We are encouraged by the strength of the supply-demand environment that we are seeing so far this year and in the first quarter, and this gives us optimism,” SanDisk Chief Financial Officer Judy Bruner said during the company’s analyst meeting on Thursday.

SanDisk shares closed 1.8 percent higher.

The company has forecast 2011 revenue of $5.3 billion to $5.7 billion, and gross margin of 39 percent to 42 percent.

Flash memory is a commodity product, and SanDisk’s fortunes are in large part determined by the equilibrium of supply and demand in the industry and its impact on pricing. [ID:nN2797320]

SanDisk said NAND flash memory supply growth is moderating, and the company sounded confident that the industry will remain in balance amid strong demand.

The overall NAND flash market is expected to grow to roughly $23 billion this year, from less that $20 billion last year.

SanDisk Chief Executive Sanjay Mehrotra said demand for flash will increase by a factor of 10 by 2014, as consumers clamor for smartphones and tablets like Apple Inc’s (AAPL.O) iPad, which use flash for storage, as well as newer applications like solid-state drives in personal computers.

    Although more flash production capacity is coming online, Mehrotra downplayed the risk that oversupply will hurt prices.

    “This is my key message regarding supply, that the outlook for supply growth is moderating,” Mehrotra said.

    SanDisk’s shares have risen 70 percent over the past year as the NAND flash industry has seen relative price stability.

    SanDisk is the No. 1 supplier of flash memory cards sold to consumers at retail. But two-thirds of the company’s sales now come from manufacturers that use flash in their devices.

    Roughly half of SanDisk’s revenue now comes from the mobile market.

    Shares of Milpitas, California-based SanDisk closed up 88 cents at $49.02 on the Nasdaq. (Reporting by Gabriel Madway; Editing by Tim Dobbyn and Matthew Lewis)

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