SanDisk revenue rises as demand grows for solid-state drives

(Reuters) - SanDisk Corp SNDK.O reported a surprise increase in quarterly revenue, its first rise in more than a year, helped by strong demand for its chips used in solid-state drives and data centers.

A variety of SanDisk memory cards are seen with a Western Digital hard drive in Golden, Colorado in this photo illustration October 21, 2015. REUTERS/Rick Wilking -

Shares of the company, which is being bought by Western Digital Corp WDC.O, rose nearly 1 percent to $76.50 in after-market trading on Wednesday.

SanDisk has been ramping up production of solid-state drives (SSDs), which are pricier than hard disk drives and are used increasingly by data centers and in consumer laptops as they are quicker, more rugged and less prone to fail.

Despite the loss of a big, unnamed customer last year, revenue from what the company calls its client SSD business rose 6 percent in the first quarter ended April 3.

Excluding the impact of the lost customer, revenue from the business, which makes SSDs used in PCs and laptops, jumped 55 percent.

“What is encouraging is that client SSD is doing well while the PC market is not doing very well,” said Sterne Agee CRT analyst Douglas Freedman. “You are seeing clear share gains from SSDs against hard drives in the PC market.”

Revenue from SanDisk’s enterprise business, which makes chips for data centers, also rose in the first quarter, by 15 percent.

SanDisk has boosted its revenue and margins by producing more SSDs at a time of declining prices for its NAND flash chips, which are widely used in smartphones, cameras and tablets to store music, pictures and other data.

Revenue from the company’s embedded business, which sells storage products to original equipment manufacturers, fell 33 percent due to weak demand from smartphone makers.

But SanDisk’s biggest business - removable products, such as USB flash drives and micro SD cards - recorded a 6 percent rise in revenue for the quarter.

The company’s net income doubled to $78.4 million, or 37 cents per share.

Excluding items, the company earned 82 cents per share, beating the average analyst estimate of 55 cents, according to Thomson Reuters I/B/E/S.

SanDisk’s total revenue rose 2.5 percent to $1.37 billion, above the average analyst estimate of $1.21 billion.

Western Digital’s $15.78 billion acquisition of SanDisk is expected to close in the second quarter.

Reporting by Kshitiz Goliya in Bengaluru; Editing by Kirti Pandey, Sriraj Kalluvila and Robin Paxton