SanDisk-2010 Investor Report

8/7/2019 SanDisk-2010 Investor Report

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INVESTOR DAYFEBRUARY 26, 2010


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Page 2 Investor Day | February 26, 2010

AGENDA

ELI HARARIChairman &Chief Executive Officer

SANJAY MEHROTRAPresident &Chief Operating Officer

SHORT BREAK

LUNCH BREAK

SHUKI NIRSenior Vice President &General Manager,Retail Business

JUDY BRUNERExecutive Vice President,Administration &Chief Financial Officer

Q & AELLIOT BROADWINVice President,

MNO Solutions

YORAM CEDARExecutive VicePresident, OEM &Corporate Engineering

DAN INBARSenior Vice President &General Manager,OEM Mobile & Imaging


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FORWARD-LOOKING STATEMENT

During our meeting today we will be making forward-looking statements.Any statement that refers to expectations, projections or other characterizationsof future events or circumstances is a forward-looking statement, includingthose relating to revenue, pricing, market share, market growth, product sales,industry trends, expenses, gross margin, future memory technology, productioncapacity and technology transitions and future products.

Actual results may differ materially from those expressed in these forward-looking statements including due to the factors detailed under the captionRisk Factors and elsewhere in the documents we file from time-to-time withthe SEC, including our annual and quarterly reports.

Reconciliations between Non-GAAP and GAAP results presented are included

in the appendix of the financial presentation.We undertake no obligation to update these forward-looking statements, whichspeak only as of the date hereof.


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ELIHARARIChairman and Chief Executive Officer

INVESTOR DAY MEETINGFebruary 26, 2010


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TODAYS THEME:

IN THE COMING DECADE,

FLASH WILL BE BIGGERTHAN YOU THINK!


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AGENDA

2009 Scorecard

Past decade

Technology, Competition, Capacity Intellectual Property

Coming decade

Summary


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SANDISK 2009 SCORECARD

Remarkable turnaround for SanDisk

Our decisive actions brought decisive results

Strong execution in technology (X3, 32nm) and operations

Renewed Samsung license agreement

Exiting 2009 with strong balance sheet

2010 Flash fundamentals as good as ever



DEMAND / SUPPLY GARTNER 4Q09

90%

95%

100%

105%

0

1,000

2,000

3,000

4,000

5,000

6,000

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

NAND Flash Supply NAND Flash Demand Sufficiency

BILLIONSOFME

GABYTES

SUPPLY/DE

MANDSUFFICIENCY

Short-Term Supply/Demand Sufficiency2008: 105.0% =Oversupply

2009: 96.0% = Shortage2010: 98.9% = Shortage

Source: Gartner NAND Flash Memory Supply and Demand, Worldwide, 1Q08-4Q10 (4Q09 Update)



EXPANDING SCALE

IT TOOK US

15 years (19912006) to ship the first 0.5 billion units

3 years (20072009) to ship the next 1 billion units

WE EXPECT TO SHIP MORE THAN1 BILLION UNITS IN THE NEXT TWO YEARS



OUR 1999 PREDICTIONS FOR 2010CAME TRUE

MarketSize

1999

CONSUMER

PC/SERVER

CONSUMERINDUSTRIAL

PC/SERVER

CD/MD

TAPE

HDD

FLASH

DRAMSRAM

Capacity Cost

Mechanical Solid State

Market

Size

2010

CONSUMER

PC/SERVER

A/V CONSUMER,WIRELESS,

INTERNET E-COMMERCE PC/SERVER

CD/MDTAPE

HDDFLASH DRAM

SRAM

Capacity Cost

Source: EH 8-25-99


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EVOLUTION OFFLASH MEMORY STORAGE

19901999: EARLY DAYS

Industrial, military

Early development of digital film, early PDAs

Early web days, DiskonKey (Sneaker-net)

20002009: DIGITAL CONSUMER REVOLUTION

Flash: ubiquitous, strategic enabler for portable personal content

Early days of Mobile Internet: 3G networkstaking off

iPhone, mobile appstaking off Social networkingtaking off


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SANDISKS PAST DECADE:2 FLASH INDUSTRY CYCLES

10-Yr CAGR (2000-2009): ~22%

Total Revenue 2010 Revenue

+144%-39%

+48%

+99%

+65%

+30%

+41%

+20%

-14%+6%

12% to 23%

$0.0

$0.5$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

$5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

(BILLIONS)


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MANAGING THRU DOWN CYCLES:RAPID RECOVERIES

See note on page 203.

2000 excludes gain on investment in foundry.

$0.66

($2.19)

$0.25

$1.02

$1.44

$2.00

$2.51

$1.73

($2.07)

$1.84

($3.00)

($2.00)

($1.00)

$0.00

$1.00

$2.00

$3.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Non-GAAP EPS


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20% 233% 238% 167% 166%221%

190%

125%

116%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GIGABYTESS

OLD

SANDISK DEMAND CONTINUEDTO GROW STRONGLY THROUGH

2 DOWN CYCLES

Gigabytes Sold (Y/Y Growth Rate)


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TECHNOLOGY,COMPETITION


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NAND COST REDUCTION TRENDS

20052009: 45%-55% annual cost reductions;

SLC MLC (~90% of bits)

200mm 300mm, mega-fabs, automation, immersion lithography

Unprecedented productivity thru rapid technology transitions

20102013: 25%-35% annual cost reductions;

MLCX3 (~50% of bits)

NAND technology more challenging at 1x nm, 1y nm

EUV lithography will likely be required below 1x nm


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3D R/W (READ/WRITE) MEMORYSCALABLE CROSS-POINT DIODE ARRAY

Joint development with Toshiba,now proceeding at Yokkaichi

Making good progress with R/Wlayer, but not yet ready forproduction

At x8 equivalent, and given ourknowhow in 3D diode arrays, webelieve 3D R/W is the most likelysuccessor for NAND in thecoming decade: could usher

second SSD wave

Source: IEDM 2009 Short Course, Low Power Approaches for Memories, by A. Nitayama


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NAND AND POST-NAND FABSIN COMING DECADE

Existing NAND mega-fabs at 1xnm will be highly depreciated, generatingattractive margins and throwing off long tail of cash

New NAND mega-fabs will be pricey (~$8 billion for 200,000 wafers/month),will need to support EUV, will need to adapt to post-NAND technologiesproduction

Industry NAND transition SLCMLC took 3 years (20022005)

Industry transition to post-NAND will be more complex, expect extendedperiod of overlapping NAND and post-NAND designs in production


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HOW WE STACK UP AGAINST NANDCOMPETITION SanDisk Flash Technology/Intellectual Property:

32nm: leader in X3, industrys most cost effective, 2010 work-horse 24nm: expect to lead with X3: production work-horse in 2011 X4: shipping products, but limited applications Systems, Advanced controllers, AFM (Adaptive Flash Management):

uniquely advantaged relative to competition

Security, Content: leadership position Die stacking: leading 8 die stacking in high volume (microSD, iNAND)

Scale: Great partnership with Toshiba: Our Fab 3 + Fab 4 deliver ~ 35% of worlds NAND output

Flash Storage is really tough to do well. Leadership requires:

Most advanced semi production technology applied on massive scale Rapid product innovations and strong IP.

SanDisk: We do Flash right !


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INTELLECTUAL PROPERTY: STATUSSAMSUNG CROSS-LICENSE:

Seven-year patent cross license renewal with estimated effectiverate of the fixed payments and royalties at approximately 50% ofrecent effective royalty rate

FLASH MEMORY PORTFOLIO: Wall Street Journals Patent Board Scorecard ranked SanDisk # 2

in 2009 among the semiconductor companies it tracks, up from # 4in 2008

Licensed to ~85% of NAND industry output

CARDS: SD, microSD now account for~85% (and growing) of all cards

soldroyalties shared with SD 3C (Toshiba, Panasonic, SanDisk)

AS YET UNTAPPED LICENSING POTENTIAL: Extensive Systems/controllers, SSD, Mobile Security (content) Fundamental patents in 3D diode arrays (apply to most 3D

approaches)


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OUR FLASH CAPACITY PLANS

We believe that growing demand should drive a healthy industry-widesupply/demand balance in 2010, likely to continue into 2011

We are focused on technology upgrades and X3 in Fab 3 and Fab 4

In 2010/2011 we are planning to acquire our 50% of remaining

unused capacity in Fab 4, bringing our captive output to ~2 million300mm wafers/year. We will leverage non captive sources when demand exceeds this captive

supply

We project demand for NAND and 3D R/W to outstrip our captive andnon-captive supply sometime in the next few years

Investment in new captive fab believed premature, will require healthydemand/supply balance and ROIC: We will evaluate continuously and proceed with caution


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GROWTH IN THE

COMING DECADE


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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

MILLIONSOFG

IGABYTES

FLASH MARKETS ARE YOUNG:GROWTH MOSTLY STILL AHEAD

Source: Chart created by SanDisk based on data from Gartner: NAND Flash Memory Supply and Demand, Worldwide,1Q084Q10 (4Q09 Update)

LegacyConsumer

Mobile

Computing


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FLASH IS EVERYWHERE

LEGACY CONSUMER: Digital cameras Digital camcorders GPS MP3 Gaming USB Flash drives e-Books

MOBILE

COMPUTING: Netbooks, Notebooks, Tablets, MID

Servers, EnterpriseOTHER: Automotive Industrial Medical Military


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iPhone/SmartPhone/Tablet= New PC


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Page 27

0

200

400

600

800

1,000

1,200

2005 2006 2007 2008 2009E 2010E 2011E 2012E 2013E

AnnualUnitShipm

ents(MM)

Notebook PCs Smartphones Desktop PCs

Notebook PC + Smartphone Shipments Dwarf DesktopConsumers Increasingly Prefer Portability

Unit Shipments of Desktop PCs vs. Notebook PCs + Smartphones, 2005 2013E

2006: Inflection PointNotebook PC + Smartphone

Shipments BrokeAway from Desktop PC

Note: Notebook PCs include Netbooks. Source: IDC, Gartner, Morgan Stanley Research estimates.

Source: December 15, 2009, The Mobile Internet Report, Mary Meeker 2009 Morgan Stanley


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Source: December 15, 2009, The Mobile Internet Report, Mary Meeker 2009 Morgan Stanley;DRAMExchange; SanDisk estimates

iPHONE SEMICONDUCTOR CONTENT

$-

$20

$40

$60

$80

$100

$120

$140

$160

$180

2007 iPhone 2.5G4, 8, 16 GB

2008 iPhone 3G8, 16 GB

2009 iPhone 3GS16, 32 GB

NAND LCD Baseband AP Camera Module DRAM Wifi RF


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FLASH SSD: MASSIVE MARKET INCOMING DECADE

SSD adoption still in early stages: expect market acceleration in2011 with 2x nm NAND, tipping point reached with1x nm NAND

SSD will come in all kinds of form-factors (e.g. thin), optimized forspecific usage models, fostering new architectures/innovation

SSD price elasticity will serve to correct industry excess supply

We see SSD as playing to our strengths in Systems, IP andcaptive supply, and expect to be a long term SSD participant

Connectivity Cloud Computing


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Page 30

Note: Apple iTunes yet to offer full length media streaming. Source: Company websites.

Connectivity = Cloud ComputingConsumers Expect to Get Their Stuff 24x7 from Palms of Their Hands

Music

in the Cloud

Video

in the Cloud

Apps / Documents

in the Cloud

Photos

in the Cloud

Professional Content

Leading repository TBD

Apple iTunes? Amazon.com?Netflix? Hulu? Spotify?

User Generated Content

Facebook is the leadingrepository for user-generatedphotos / videos / comments /links to music / social games

Unified DigitalLocker

Shopping / Stuff

in the Cloud

Source: December 15, 2009, The Mobile Internet Report, Mary Meeker 2009 Morgan Stanley
http://cdn.last.fm/flatness/badges/lastfm_red.gifhttp://www.pandora.com/http://www.amazon.com/gp/video/help/faq.html?pf_rd_p=485232071&pf_rd_s=center-1&pf_rd_t=101&pf_rd_i=16261631&pf_rd_m=ATVPDKIKX0DER&pf_rd_r=0HNMJVRK6EFFC7P7X3BR


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SUMMARY: FLASH IS EVERYWHERE,WILL BE BIGGER THAN YOU THINK!

FLASH UBIQUITOUS, AND GROWING

SMARTPHONE = NEW PC FLASH SSD

MOBILE INTERNET IN EARLY INNINGS, WILL BE BIGGER THAN

YOU THINK (Morgan Stanley*)

CLOUD COMPUTING: LAST NODE ON NETWORK, IN YOURPOCKET

HIGHLY SCALED FLASH GETTING HARD TO DO WELL,SYSTEM SOLUTIONS BECOMING KEY PLAYING TO OURSTRENGTHS

Source: December 15, 2009, The Mobile Internet ReportMary Meeker 2009 Morgan Stanley


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SANJAY

MEHROTRAPresident & Chief Operating OfficerWELL POSITIONED FORPROFITABLE GROWTH


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AGENDA

Market Opportunities and Innovation

Leadership in Technology and Cost

Scalable Operations, Solid Execution

SanDisk well positioned in all these areas due to its VerticallyIntegrated Structure and Diversified OEM/Retail Businesses


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GLOBAL REACH STRONGER THAN EVER

Bell WorldBest BuyCostcoCVSFuture ShopGameStopK-MartMeijer/FoodOffice DepotOfficeMaxSears

SprintStaplesVerizonWalgreensWalmart

CarrefourCasa BahiaExtraFNACMusimundoSanbornsRipleyWalmart

Carphone WarehouseCarrefourCometDixonsFNACJessopsOrangeMediaMarktRingfotoSaturnTescoWalmart

AmazonBICEdionKsKitamuraKojima

MatsukiyoYamadaYodobashi

Japan

N. America

Bing LeeBroadwayCiticallFocusFortressJumboLotteMIcroMaxNoel Leeming

OfficeWorksRelianceTesco Lotus

242,000 storefronts world wide (Retail) 5 of top 10 customers in 2009 were Global Handset Manufacturers (OEMs)

Increasing revenue contribution from emerging markets

LatinAmerica

Asia/Pac Rim

Europe


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0

10,000

20,000

30,000

40,00050,000

60,000

70,000

80,000

90,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

WE ARE IN THE EARLY STAGES OF FLASHIN MOBILE AND COMPUTING MEGA-MARKETS

MILLIONSOF

GIGABYTES

76 Billion GB

Source: Gartner: 4Q09 NAND & SSD Update: Enabling Products or Enabling Profits? (November 2009)

2008-2013, 5-Yr CAGR: 74%

Mobile

Computing

20 Million GB

Other Automotive Computing Gaming Mobile Phone

Camcorder USB Drive Media Player Digital Camera


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SMARTPHONES: CATALYST FORGROWTH IN MOBILE FLASH DEMAND

Source: SanDisk, based on data from Gartner, Strategy Analytics and iSuppli.

Annual Smartphone Salesexpected to double in the

next 4 years

0

200

400

600

800

10001200

1400

1600

1800

2009 2010 2011 2012 2013

MUNITS

SmartphonesAverage Feature Phones Average Basic Phones Average


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SANDISK MOBILEPOINTS OF ENGAGEMENT:

BEST IN THE INDUSTRY

HandsetVendor

NetworkOperator

GlobalRetail

Embedded Bundled Bundled AftermarketAftermarket


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SOLID STATE DRIVE:A LARGE EMERGING DEMAND DRIVER

SSD adoption expected to pick up in 2010, accelerate in 2011

Gartner projects SSD to approach 20% of NAND bits shippedin 2012

Notebooks: Price/Performance key trigger point

Flash uniquely enables exciting new devices Netbooks, Tablets, others Smartphone as a PC Thin Form Factor, Low Power, High Performance


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INNOVATION


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SANDISK INNOVATION FOCUS AREAS

Mobile Embedded Applications

Mobile Network Operator Service Discovery Cards

Solid State Drives

Leveraging Technology and System Expertise Across the EntireSanDisk Product Portfolio


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PIONEERING NEW MOBILEEMBEDDED SOLUTIONS

TimeMLC X3

ApplicationRequirements

Raw FlashCapability


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PIONEERING NEW MOBILEEMBEDDED SOLUTIONS

TimeMLC X3

ApplicationRequirements

Raw FlashCapability

Adaptive Flash Management (AFM) bridging the gapSanDisk pioneers


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PARTNERING WITH MOBILE NETWORKOPERATORS:

SERVICE DISCOVERY CARDS

Historically, carriers have viewed the microSD cards as an extensionof the phonelike a Bluetooth earpiece.

The Mobile Internet explosion is forcing carriers to find economicalsolutions to grow their service offerings

SanDisks Service Discovery Cards (SDC) leverage unique capabilities(streaming, caching, encrypting) enabled by our system, to act as anextension of the network.


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SANDISK SSD INNOVATION FOCUS

SanDisk expects to be a significant participantin the SSD market

Evolving Product lineup

2009 SanDisk

pSSD (MLC) for Netbooks

2010 SanDiskG3 SSD (MLC) product launch

2011 Targeting innovative, next generation productsfor Notebook, Netbook, Tablet and Smartphone markets


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LEVERAGING TECHNOLOGYAND SYSTEM EXPERTISE

SANDISK EXTREME

SANDISK EXTREMEPRO

Up to 90MB/sec

SANDISK ULTRA

Up to 15MB/sec

BLUEX3, X4

X2, X3

X2

High Performance, High Capacity, Low Cost

EMBEDDEDX2, X3


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SANDISK-TOSHIBA PARTNERSHIPBUILDING ON 10 YEARS OF

NAND COLLABORATION 8 Generations of MLC & 3 Generations of X3 Developed

Jointly Over 10 Years

R&D Collaboration and Cost Sharing NAND and 3D Read/Write

2 Existing Flash Manufacturing Joint Ventures in Fab 3 and Fab 4

SanDisk and Toshiba Combined 300mm NAND Capacity > 4 MilWafers/year Our cost benefits capture the full scale of production in Fab 3 and Fab 4


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X3 IS EXTREMELY VALUABLE

Significantly increases Gigabytes/wafer SNDK 32nm, 32Gb X2 140 mm2

SNDK 32nm, 32Gb X3 113 mm2

Substantially Lowers Cost without any additional Capital

Investment or Process Complexity

Pricing competitive to X2: Expands Gross Margin and ImprovesReturn on Invested Capital

X3 ~20% more Gigabytes/wafer


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IF YOU CAN DEPLOY IT

0%

10%

20%

30%

40%

50%

60%

4Q09

Source: Gartner: 4Q09 NAND & SSD Update: Enabling Products or Enabling Profits?" November2009

ESTIMATED X3 MIX OF FAB BIT OUTPUT (GARTNER DATA)

System Expertiseis key to enablinghigh X3 production mix

SanDisk Toshiba Samsung Micron Hynix


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SANDISK UTILIZING X3 IN ALL MAJOREND MARKETS

Products utilizing X3Mobile: microSD, M2, iNANDImaging: SD, MS Pro Duo

Q409 END MARKET SALES UTILIZING X3

0%

10%

20%

30%

40%

50%60%

70%

80%

90%

100%

Mobile Imaging USB

% of GB sold


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2008 2009 2010 2011 2012 2013

256G

128G

64G

32G

16G

8G

4G

SANDISK NAND ROADMAP

43nmX2, X3

43nmX2, X3

43nmX4

32nmX2, X3

32nmX3

24nmX2, X3

24nmX3

1xnmX2, X3


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5TH CONSECUTIVE YEAR OF> 50% COST REDUCTION(1)

COST/GB REDUCTION

MEMORY

(Includes 1H09 Fabunderutilization)

NON-MEMORY

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009

Technology Transitions

Increased Mix of X3/X4

Economies of Scale andProductivity Improvements

1 See note on Page 198

Total Cost Reduction Memory Non-Memory


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2008 2009

CostperUnit

NON-MEMORY COSTS DECLINED EVENFASTER THAN MEMORY COSTS(1)

ex: 4GB MICROSD CARD

-52%

77%

80%

Memory Controller Assy/Test Other

1 See note on Page 198


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2010 COST REDUCTION OUTLOOK

Cost/GB reduction expected to be in the range of 30-40%

X3 expected to be > 50% of fab bit output

Key Cost Reduction Drivers: 32nm expected to be > 70% of fab bit output Continued non-memory cost reduction


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JOINT VENTURE FABS: INDUSTRYLEADING SCALE AND EFFICIENCY

SanDisk 2009

~1.5 Million 300 mm wafers output (SanDisk) returned to 100% Utilization in 2nd Half

Bit output growth ~38% includes JV restructuring

43nm >90% Bit production

X3/X4 ~50% of Bit production

Source: SanDisk.

.

Yokkaichi, Japan


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2010: SUPPLY GROWTH ALIGNED WITHDEMAND

MEMORY SUPPLY PLANS

Captive bit output growth expected to be at or below 70% Growth mostly expected from 32nm transition In 2H 2010, expect to add ~10% wafer capacity to JVs by expanding

in unused Fab 4 clean room space

DEMAND EXPECTATIONS

Bit demand growth expected to be greater than 70%

END MARKET SHARE

Expect to maintain or grow market share through improvedinventory management and potentially non-captive purchases


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TOTALMEMORYUNITSSOLD

RECORD 2H09 UNIT SALES:OUTSTANDING EXECUTION

Enabled by Flexibleand ScalableSupply Chain


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Retail OEM Technology OperationsFab

FOCUSED ORGANIZATION,VERTICAL INTEGRATION STRATEGY

EXECUTION

Market Opportunities Cost Effectiveness Scale


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SUMMARY

Strong Demand Ahead

Spurring Growth through both OEM and Retail Businesses

Building on core competencies

Product Innovation Technology Leadership

High Volume Operations

Solid track record of execution

SanDisk Best Positioned to

Drive Future Growth


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SANDISK 2010

INVESTOR DAY MEETING

We are taking a short break.The Investor Day Meeting will resume shortly.


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YORAMCEDARExecutive Vice President, OEM & Corporate Engineering


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SANDISKS OEM PORTFOLIO

MOBILEIMAGING & GAMING COMPUTING

PRIVATE LABEL & COMPONENT BUSINESS


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SANDISKS 2009 OEM REVENUE MIX

Grew from ~$1.0B in 2008to ~$1.5B in 2009 with strong

growth in units and PBs

Mobile HandsetVendors

52%

Computing5%

Imaging & Gaming12%

Private Label Cards& Components13%

Mobile NetworkOperators

18%


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52%

Computing5%

Imaging & Gaming12%

Private Label Cards& Components13%


18%


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IMAGING & GAMING

SLR HD VIDEO ON SD MOBILE GAMING PMP

16 32 64GB+


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52%

Computing5%

Imaging & Gaming12%

Private Label Cards& Components

13%


18%

PRIVATE LABEL AND


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PRIVATE LABEL ANDCOMPONENT BUSINESS

In 2009, SanDisk introduced a new business...

it represented 13% of our OEM business in 2009.



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52%

Computing5%

Imaging & Gaming12%


13%


18%


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MOBILE STORAGE GROWTH


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0

200

400

600

800

1,000

1,200

1,400

1,600

2007 2008 2009 2010 2011 2012 2013

mobile cards total handsets handsets w. card slot

SHIPMENTS OF ALL HANDSETS, SLOTTED HANDSETS, EMBEDDED NAND, CARD SLOTS - M UNITS

MOBILE STORAGE GROWTH

Source: Wireless Device Strategies Service, Strategy Analytics, February 2010


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52%

Computing5%

Imaging & Gaming12%


13%


18%


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YOU CAN NEVER BE TOO THIN


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1.1 thick2.5 lbs

$1.85/GB

DELL MINI 10 - HDD

0.55 thick1.3 lbs

$21.00/GB

SONY VAIO X - SSD

YOU CAN NEVER BE TOO THIN...

Half as thickHalf as heavy

10x the value

Thin is In

Source: Dell, Sony, Feb 2010

PERFORMANCE & MODULAR SSD


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PERFORMANCE & MODULAR SSD

Modular SSD - pSSD Performance SSD - G3

Smaller and lower cost than an HDD Faster and more reliable than an HDD

Netbooks Smartbooks

Tablets

Notebooks Desktops

Servers

SSD GROWTH IS JUST STARTING


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-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2007 2008 2009 2010 2011 2012 2013

DEMAND

(PB)

SSD: GROWTH IS JUST STARTING

Source: Gartner: Semiconductor Forecast Database, 4Q09

PerformanceSSD

ModularSSD

Enterprise


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8 of the 10Top Netbook MakersUse SanDisk Modular SSD

Revenue basis, Source: SanDisk Market Research


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OEM offers tremendous growthopportunities which SanDisk isuniquely positioned to exploit.

SYSTEM DESIGN AT SANDISKS CORE


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SYSTEM DESIGN AT SANDISK S CORE

WORLD CLASSCutting-edge, capital-intensivewafer fabs

WORLD CLASSResponsive distribution: lean supplychains and global footprints

MemoryFabrication

MemoryDesign

SystemDesign

SystemAssembly &

Logistics

Retail& OEM

SANDISKS COREMore bits, more performance andultimately more revenue ($$) per wafer


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SANDISK DRIVES EVOLUTION OF


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SANDISK DRIVES EVOLUTION OFLEADING FLASH FORMATS

Standardization Market Expansion

Market Expansion Volume

UFD

mDOC

miniSD

microSD

SD

MMC

CF

Memory

StickPRO

iNAND

SDC

PC Card

iNAND Focus is on enabling embedded X3

SDC More than memory service discovery card

0

200

400

600

800

2004 2005 2006 2007 2008 2009 2010

SlottedHandsets(M)

Source: Wireless Device Strategies Service, Strategy Analytics, February 2010


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APPLICATION ADAPTIVE


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Page 92 Investor Day | February 26, 2010SanDisk Confidential

ApplicationTarget Specs

APPLICATION-ADAPTIVEFLASH MANAGEMENT

Raw NANDCapabilities

Adaptive FlashManagement

THE KEY TO X3 IS ADOPTION


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2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Time from Introduction to 50% bit share

X2 MLC

X2

SanDisk Rest of Industry 50% Adoption

Source: Internal Estimates, Gartner: NAND Flash Memory Supply andDemand, Worldwide, 1Q084Q10 (4Q09 Update)


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THE KEY TO X3 IS ADOPTIONTime from Introduction to 50% bit share

SanDisk Rest of Industry 50% Adoption

Source: Internal Estimates, Gartner: NAND Flash Memory Supply andDemand, Worldwide, 1Q084Q10 (4Q09 Update)

0%

10%

20%

30%

40%

50%

2008 2009 2010

x3PB%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

X2 MLC

X2

?X3

X3


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DAN

INBARSenior Vice President & General Manager,OEM Mobile & Imaging

STORAGE FOR MOBILE


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Removable Card

Embedded Storage User storage Mobile system/boot

code

STORAGE FOR MOBILERemovable and Embedded MLC NAND Based Devices


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EMBEDDED MANAGED NAND


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NOR

SLC

MLC

EMBED

DEDTECHNOLOGYA

DVANCES

Embedded Market2009

EMBEDDED MANAGED NAND SanDisk has been constantly driving the industry to

managed NAND architecture

MLC

Boot

EMBEDDED MANAGED NAND


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NOR

SLC

MLC

EMBED

DEDTECHNOLOGYA

DVANCES

Embedded Market2009

EMBEDDED MANAGED NAND SanDisk has been constantly driving the industry to

managed NAND architecture

MLC

Boot


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SANDISK ADVANCED TECHNOLOGY


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SANDISK ADVANCED TECHNOLOGYUnleash the Full Potential of Embedded Managed NAND



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Market Requirement



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Market Requirement

43nm X2


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S S C C O OGUnleash the Full Potential of Embedded Managed NAND

SLCEmulation

SmartCaching

SmartCaching

Market Requirement

43nm X232nm X2

32nm X3



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Unleash the Full Potential of Embedded Managed NAND

SLCEmulation

SmartCaching

High Performance Mode

SmartCaching

Market Requirement

43nm X232nm X2

32nm X3


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SLCEmulation

SmartCaching

SmartCaching

Market Requirement

43nm X232nm X2

32nm X3

32nm X3 + AFM

AdaptiveFlash

Management(AFM) Bridgingthe Gap




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SLCEmulation

SmartCaching

SmartCaching

Market Requirement

43nm X232nm X2

32nm X3

32nm X3 + AFM

AdaptiveFlash


Leveraging X3 inEmbedded requiresadvanced system

technology




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SLCEmulation

SmartCaching

SmartCaching

Market Requirement

43nm X232nm X2

32nm X3

32nm X3 + AFM

AdaptiveFlash


Leveraging X3 inEmbedded requiresadvanced system

technology


SMART MEMORY FOR SMART PHONES


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CACHE High random

performance High endurance

OPTIMIZED FOR MOBILE SYSTEM

Boot code and user storage in a single device Design based on actual handset usage modeling Enhanced system responsiveness e.MMC 4.41

USER AREA

High capacity mass storage 3-bits per cell (X3)

CODE AREA Boot and code storage High performance Highly reliable

MOBILE EMBEDDED MARKET GROWTH


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* Source: Strategy Analytics (Feb 4, 2010), embedded handsets data relates to 1GB and above

SANDISK IS GROWING EVEN FASTER THAN THE MARKET

Expected consistent growth in embedded MLC TAMfueled by the high-end segment growth

Handsets with Embedded MLC% of total handsets

0

100

200

300

400

500

600

700

800

2009 2010 2011 2012

M

u

OTHER EMBEDDED OPPORTUNITIES


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PORTABLE NAVIGATION DEVICES

PORTABLE MEDIA PLAYERS

DVC

eREADERS

SMARTBOOKS/TABLETS

NETBOOKS

GAMING


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THANK YOU


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Vice President, MNO Solutions

MOBILE NETWORK OPERATORS

ELLIOTBROADWIN


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9 of the top 10Mobile Network Operators

Buy SanDiskSource: Operator ranking according to Strategy Analytics, January 10, 2010


iPHONE CHANGES


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iPHONE CHANGES

EVERYTHINGTwo dramatic threats to carriers

which Flash can

significantly address

and SanDisk is uniquely

equipped to deliver


STRATEGIC PAIN-POINTS


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STRATEGIC PAIN POINTS

THE CLOGGED PIPE DILEMMA

Watching a YouTube video on asmartphone can be equivalent tosending 500,000 text messagessimultaneously. (O2s CTO Derek McManus)

Thanks a billion

THE DUMB PIPE DILEMMA


STRATEGIC PAIN-POINTS


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Page 127 Investor Day | February 26, 2010Page 127 Investor Day | February 26, 2010


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WHAT CAN FLASH

DO TO HELP?



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TIME &

PLACE SHIFTING


SHIFTING TIME AND PLACE IN A FLASH


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MobileData

(Off peak)

WiFi(home)

Mobile Data(Peak)

LocalFlashMemoryCache

SHIFTING TIME AND PLACE IN A FLASH

Illustrative Data

Pre-

Loading

Ban

dwidthFriendly

Availability(everywhere, all the time)


CASE STUDY:


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CASE STUDY:

SDC & MUSIC



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STORAGE MAKES THE PIPE SMARTER


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Early broadband networks relied on big iron in

large Network Operations Centers



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CDNs moved content closer to the edge to

speed delivery and improve the userexperience



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Todays wireless networks are facing similar

last mile issues


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UNIQUELY


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UNIQUELY

SANDISK

Hardware:TrustedFlash

Firmware:Hidden

Partitions& Caplets

Software:MobileApps.

Servers:RT, M2M with

content owners

ContentLicensing



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SANDISK 2010


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SANDISK 2010

INVESTOR DAY MEETING

We are taking a short lunch break.

The Investor Day Meeting will resume shortly.


140/247


SHUKINIRSenior Vice President & General Manager,Retail Business

SANDISK RETAIL:LEADERSHIP WITH A PREMIUM

AGENDA


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AGENDA

The strength of our retail position

The superiority of our brand and how

we are going to continue building it How our retail business will grow over

the next several years


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THE STRENGTH

OF SANDISK RETAIL


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A CLEAR #1 IN MARKET SHARE


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0%

5%

10%

15%

20%

25%

30%

35%

2008-1

0

2008-1

1

2008-1

2

2009-0

1

200

9-02

2009-0

3

2009-0

4

2009-0

5

200

9-06

200

9-07

2009-0

8

200

9-09

200

9-10

200

9-11

200

9-12

SANDISKSource: Gfk Europe, December 2009

EMEA

The total market is made up of Flash cards and USB Flash drives.

A CLEAR #1 IN MARKET SHARE


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The total market is made up of Flash cards and USB Flash drives.

Source: Gfk Japan, December 2009

JAPAN

0%

5%

10%

15%

20%

25%

2008

-10

2008

-11

2008

-12

2009

-01

2009

-02

2009

-03

2009

-04

2009

-05

2009

-06

2009

-07

2009

-08

2009

-09

2009

-10

2009

-11

2009

-12

SanDisk


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A CLEAR PREMIUM OVER COMPETITION


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0%

2%

4%

6%

8%10%

12%

14%

16%

18%20%

Average 2008-2009

PRICEPREMIUM

APAC EMEA JAPAN U.S.

Source: NPD and GFK, 2009. SD 2GB selling prices

BROADEST PRODUCT LINE


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DIGITAL IMAGING & VIDEO DIVERSE MARKET SEGMENTS

MOBILE

ULTRA

EXTREME PRO

EXTREME

AUDIO/VIDEOGAMING

STANDARD

COMPUTING


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ADDRESSING CONSUMERSEGMENTIMAGING


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SEGMENTIMAGING

Basic Point & ShootEveryday Consumer

Featured-Rich Point & ShootHigh MegapixelHigh Def Movie

HighEnd

Pro DSLR

ProsumerDSLR

EntryDSLR

SEGMENTATION PAYS OFF


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30%

70%

Retail Imaging Revenue Units 2009

55%

45%

Margin $ From Retail Imaging 2009

High Performance Standard

ADDRESSING CONSUMER NEEDSCOMPUTING


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COMPUTING

Heres how:SanDisk UltraBackupUSB Flash Drive

The first to add a simple

customer backup* button tothe USB Flash Drive

Adding Mac OS support totransfer data betweencomputers

Always have your valuablefiles with you in a portable,rugged solution

Note: Backup function currently works only with Windows operating system

ADDRESSING CONSUMER NEEDSCOMPUTING


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COMPUTING

Heres how:SanDiskG3 SSD

A true HDD replacementthat provides better

computing performance Highly reliable with long-

term data endurance

ADDRESSING CONSUMERUSE CASESMOBILE


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USE CASES MOBILE



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USE CASES MOBILE

Heres how:SanDiskMediaManager Application

Take the guess work outof transferring files to yourphone

Easily find and browse allyour music and photos onyour PC



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USE CASES MOBILE

Heres how:slotRadio+

Most provide 1,000 songs+ 4GB free memory spaceto store your own content

Phone application formusic playback anddiscovery of the differentcard genres

Billboard DecadesHandcrafted Playlists

Billboard HitsHandcrafted Playlists


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SanDisk is the

premium brand inmemory cards in retail

SANDISK RECOGNIZEDAS LEADER BY CONSUMERS


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AS LEADER BY CONSUMERS

Source: Imaging Cards in US Retail, an In-Store Market Researchby BrandTruth Marketplace Intelligence Services, 2009

79% of Shoppers answeredSanDisk first

2% of Shoppers mentioned some

other memory card brand first19% of Shoppers related that theywere not sure/didnt know

SANDISK RECOGNIZED AS LEADERBY STORE ASSOCIATES AS WELL


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BY STORE ASSOCIATES AS WELL

87% of associatesrecommended SanDisk first

6% of associates recommended some

other memory card brand first

7% of associates related that theywere not sure/didnt know

Source: Imaging Cards in US Retail, an In-Store Market Researchby BrandTruth Marketplace Intelligence Services, 2009


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WALMARTUSA


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ELDORADOMOSCOW, RUSSIA


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BIC YURAKUCHOJAPAN


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EZONE, STAPLES & JUMBOINDIA


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UNIEUROITALY


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Page 165 Investor Day | February 26, 2010 165

VARIOUS RETAILERSARGENTINA


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SHARAF DGDUBAI, UAE


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February 25, 2010

BESTBUYXUJIAHUI, CHINA


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STATION OUTSIDEBIC YURAKUCHOJAPAN


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DIXONSHEATHROW AIRPORT, UK


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SATURNPARIS, FRANCE


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MEDIAMARKTGERMANY


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25 February 2010

TAOYUAN AIRPORT DFSTAIWAN


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PHOTO SPECIALTY CHANNELNY


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ELIFESINGAPORE


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MTR STATIONHONG KONG


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HUB STATIONSTOKYO, JAPAN


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In More than 242,000 Stores

SANDISK BRAND OWNSTHE LAST 10 FEET


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SanDisk retail businesswill continue to growin the coming years

IMAGING MARKET PROJECTED TOGROW FURTHER


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Source: Chart created by SanDisk based on data from iSuppli, data flash Q4 Market Tracker, 1209, and Gartner Flash Card Forecast 11/09

Most new camcorders using flash

Most new digital cameras have an HD-Video function

USB MARKET PROJECTED TOGROW FURTHER


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Ubiquity of USB Ports

Additional use cases

STRONG MOBILE END MARKETGROWTH PROJECTED


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More smart phones

Greater need for storage on mobile phones

KEYS TO SUCCESS IN BRIC


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Local teams have the responsibility,budgets and accountability

Business model adjusted to the local

competitive landscape



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Products designed for thespecific market needs



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Marketing campaigns to enhance brandawareness and premium

CHINA INDIA

SUMMARY


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SanDisk Retail is uniquely positioned with Clear market share leadership Clear price premium Broadest product line targeted at specific consumer segments

The superiority of our brand Has been built in the last 10 feet

Has leveraged the innovative and differentiated products comingfrom SanDisk Will continue to leverage on in-store presence

Our retail business will grow over the next several years through Continuous growth of imaging and computing Substantial growth in mobile Increasing our share in BRIC


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JUDYBRUNERExecutive Vice President, Administration

and Chief Financial OfficerFINANCIAL REVIEW


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BY END MARKET, MOBILE & IMAGINGWERE THE PRIMARY DRIVERS OFPRODUCT REVENUE GROWTH IN 2009


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PRODUCT REVENUE GROWTH IN 2009

$0

$100

$200

$300

$400

$500

$600

$700

Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409

REVENUEINMILLIONS

Mobile Imaging USB AV & Gaming Other Markets

BY CHANNEL, OEM DROVE PRODUCTREVENUE GROWTH IN 2009


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$0

$100

$200

$300

$400

$500

$600

$700

Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409

REVENUEINMILLIONS

OEM Retail

RETAIL DEMAND STRONG IN APAC;OPPORTUNITY REMAINS FOR RETAILRECOVERY IN AMERICAS/EMEA


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2006 2007 2008 2009

UNITSALESINM

ILLIONS

Americas EMEA APAC

RECOVERY IN AMERICAS/EMEA

SIGNIFICANT CHANGE IN PRICINGTRENDS IN 2009 SANDISK ASP/GB EXITS 2009 ABOVE Q109 LEVEL


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-35%-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%15%

2005 2006 2007 2008 2009

SNDKQ/QAS

P/GBCHANGE

Q1 Q2 Q3 Q4

COST REDUCTION EXCEEDS PRICEDECLINE IN 2009, LEADING TOIMPROVED GROSS MARGINS


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-52%

-58%

-60%

-62%

-48%

-54%

-55% -55% -55%

-52%

-65%

-60%

-55%

-50%

-45%

2005 2006 2007 2008 2009

IMPROVED GROSS MARGINS

Change in Underlying Cost/GB (1)Change in ASB/GB

(1) Underlying Cost/GB is calculated using Non-GAAP Cost of Sales, adjusted as follows:2008: excludes inventory reserves, fab impairment charges, and accruals for 2009 fab underutilization2009: excludes inventory reserve benefits, and includes all costs for 2009 fab underutilization

PRODUCT GROSS MARGINRETURNS TO HISTORIC HIGHS BY Q409


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45%

36%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

(1) 2006 - 2009 Product GM% is Non-GAAP excluding stock comp expense, amortization of acquisition-related intangible assets, andpurchase accounting adjustments.

(2) Underlying Product GM% is calculated using Non-GAAP Cost of Sales, adjusted as follows:2008: excludes inventory reserves, fab impairment charges, and accruals for 2009 fab underutilization2009: excludes inventory reserve benefits, and includes all costs for 2009 fab underutilization

2005 2006 2007 2008 2009

Product GM % (1) Underlying Product GM % (2)


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$577 $507$685 ($783) $629

REPORTED OPERATING MARGIN(1)

REACHES RECORD IN Q409

$600 40%


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2005 20072006 2008 2009

(1) 20062009 is Non-GAAP Operating Margin excluding stock comp expense, amortization of acquisition-related intangible assets,purchase accounting adjustments, and impairments of goodwill and acquisition-related intangible assets.

$INMILLIONS

%REVENUE

Operating Margin as a % of Total Revenue

($800)

($600)

($400)

($200)

$0

$200

$400

$

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

-80%

-60%

-40%

-20%

0%

20%

UNDERLYING OPERATING MARGIN(1)RETURNS TO NEAR HISTORIC HIGH INQ409


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23.6%

25.0%

21.0%

13.0%

-5.4%

4.4%

23.0%

26.4%21.3%

17.9%

-20.7%

25.9%

-30%

-20%

-10%

0%

10%

20%

30%

2004 2005 2006 2007 2008 2009

UNDERLYINGO

PERATINGMARGIN

Fourth Quarter OnlyFiscal Year

(1) 20062007 Product GM% is Non-GAAP excluding stock comp expense, amortization of acquisition-related intangible assets, andpurchase accounting adjustments.20082009 Product GM% is underlying Product GM% calculated using Non-GAAP Cost of Sales, adjusted as follows:2008: excludes inventory reserves, fab impairment charges, and accruals for 2009 fab underutilization2009: excludes inventory reserve benefits, and includes all costs for 2009 fab underutilization

ACHIEVED RECORD EPS(1) IN Q409


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$2.00 $1.73$2.51 $(2.07) $1.84

0.37

0.58

0.30

0.55 0.61 0.54

0.750.68

0.87

0.69

1.18

(0.48)

0.19

0.440.21

0.39 0.36

(0.10)

(0.59)

(1.59)

($2.00)

($1.50)

($1.00)

($0.50)

$0.00

$0.50

$1.00

$1.50

2005 2006 2007 2008 2009

(1) 20062009 is Non-GAAP EPS excluding stock comp expense, amortization of acquisition-related intangible assets,purchase accounting adjustments, impairment of goodwill and acquisition-related intangible assets, non-cash economicinterest expense, and related tax adjustments and valuation allowance. Note: EPS in Q1 2000 was higher than in Q42009 due to a gain on an investment in foundry.

Q1 Q2 Q3 Q4

$0.92withoutinventoryreservebenefits

INVENTORY TURNSIMPROVE SIGNIFICANTLY Y/Y Factors included: JV Restructuring; Fab Slowdown and


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0.0

1.0

2.0

3.0

4.0

5.0

6.0

Q408 Q109 Q209 Q309 Q409

IN

VENTORYTURNSMEASUREDINPBs

No Capacity Additions; Process Improvements; Sales Growth

Includes SanDisk Owned Inventory: Raw Material, WIP, Finished Goods and Retail & OEM Consignment

RETURNED TO POSITIVEFREE CASH FLOW Q4 Cash Flow from Operations and 2009 FCF were Highest Ever


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Cash Flow from Operations Cash Used in Investing Free Cash Flow

Cash Used in Investing excludes purchases, sales and maturities of short-term and long-term marketable securities.

$inM

illions


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GROWTH AND EARNINGSPOWER RETURN


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Decisive actions & strong execution drove rapidrecovery in 2009:

Revenue up 6%

Began year in a loss position, exited year at recordprofit levels

Generated highest ever positive free cash flow

Balance sheet and financial position strengthened

FINANCIAL REVIEW:


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A PATH TO A PROMISINGFUTURE

Growth and Earnings

Power Return

Balancing Growth, Profits

and Cash Flow

2010 CAPITAL INVESTMENTS:MODERATE AND AFFORDABLEOver 7 years:

JV ti h fl & t f it l f d 28% f f b


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JV operating cash flow & return of capital funds ~28% of fab capex Operating lease financing funds ~42% of fab capexvery attractive

cost of capital$ in Millions ACTUAL FORECAST 7-YEAR TOTAL

CAPITAL INVESTMENTS FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 w/10 midpt

Fab 1 & 2 33 91 15 139

Fab 3 23 519 905 899 260 69 200 2,875

Fab 4 4 700 1,174 241 400600 2,618

TOTAL JOINT VENTURE FABS $ 56 $610 $ 924 $1,599 $1,433 $310 $600$800 $5,632

SanDisk Owned Fab Equipment 63 39 102

Other SanDisk CapEx 63 95 176 259 184 60 100 937

TOTAL CAPITAL INVESTMENTS $182 $744 $1,100 $1,858 $1,617 $370 $700$900 $6,672

FUNDING FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 w/10 midpt

Sale of Tools/Restructuring 39 277 316JV Oper Cash Flow/Return of Capital 328 237 374 207 55 300400 1,551

JV Operating Lease Financing 225 482 612 945 0 100 2,365

Net Cash Outlay 182 191 381 872 426 38 300400 2,440

TOTAL FUNDING $182 $744 $1,100 $1,858 $1,617 $370 $700$900 $6,672

CAPITAL INVESTMENTA MODERATE % OF REVENUE FOR 2010

Over the Long-Term, we Target an Average of 20%-30% of Revenue toBalance Growth and Positive Free Cash Flow


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$182

$744

$1,100

$1,858

$1,617

$370

10%

32% 34%

48% 48%

10%

~20%

0%

10%

20%

30%

40%

50%

60%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

2004 2005 2006 2007 2008 2009 2010

Capital Investments % of Revenue

Balance Growth and Positive Free Cash Flow

$700-$900

Capital Investments are funded by: JV Operating Cash Flow/Return of Capital, JV Operating LeaseFinancing and Net Cash Outlay

$in

Millions %

ofRevenue

DEFINING SANDISKS LONG-TERMTARGET FINANCIAL MODEL (LTFM)


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The LTFM is the P&L model we believe best balances: Growth, profitability & cash flow

The LTFM is the P&L model we aim to achieve

We will not be in the LTFM every year

Industry & SanDisk subject to cyclicality

In some years we will be below the LTFM, and in some years we willexceed the LTFM


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DEFINING SANDISKS LTFM

$ in Millions 2005 2006 2007 2008 2009 LTFM

Revenue $2,306 $3,258 $3,896 $3, 351 $3,567


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Revenue Growth Y/Y 30% 41% 20% -14% 6%Product Revenue 90% 90% 88% 85% 88% 92%93%

L&R Revenue 10% 10% 12% 15% 12% 7%8%

TOTAL REVENUE 100% 100% 100% 100% 100% 100%

Product Gross Margin (1) 35.5% 31.8% 24.3% -13.4% 28.4% 30%36%

Total Gross Margin (1) 42.2% 38.8% 33.1% 3.8% 36.7% 35%41%

R&D (1) 8.4% 8.2% 9.5% 11.7% 9.8% 7%9%

S&M (1) 5.3% 5.6% 6.7% 9.2% 5.3% ~5%

G&A (1) 3.4% 4.0% 3.7% 5.3% 4.0% ~3%

Restructuring 0.2% 1.1%

Operating Expenses (1) 17.2% 17.7% 20.1% 27.2% 19.1% 15%17%

OPERATING INCOME (1) 25.0% 21.0% 13.0% -23.4% 17.6% 20%24%

(1) 20062009 and LTFM is Non-GAAP excluding stock comp expense, amortization of acquisition-related intangible assets,purchase accounting adjustments, and impairment of goodwill and acquisition-related intangible assets.

PLANNING ASSUMPTIONS FOR 2010


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Healthy supply/demand balance in industry Mobile end market remains key growth driver

Consumer demand in U.S. and Europe remains somewhat muted

Completing 32nm transition; beginning 24nm ramp in Q410

Price decline less than estimated cost decline Close reins on spending; modest increases weighted toward R&D

Limited use of non-captive memory, but could increase if demandis stronger

FORECAST FOR 2010

$in Millions LTFM FCST 2010

Revenue $4,000$4,400

Objective is to be within LTFM


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(1) Non-GAAP excluding stock comp expense, amortization of acquisition-related intangible assets, purchaseaccounting adjustments, and impairment of goodwill and acquisition-related intangible assets.

Revenue Growth Y/Y 12%23%Product Revenue 92%93% ~92%

L&R Revenue 7%8% ~8%

Total Revenue 100% 100%

Product Gross Margin (1) 30%36% 28%34%

Total Gross Margin (1) 35%41% 34%40%

R&D (1) 7%9%

S&M (1) ~5%

G&A (1) ~3%

Restructuring

Operating Expenses(1)

15%17%

$725$750

16% 19%

OPERATING INCOME (1) 20%24%15%24%

Objective 20%+


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UPDATE ON Q1 2010

Pricing environment remains more favorable than in past Q1s


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(1) Non-GAAP GM, Opex, Other Income and Tax rate exclude: stock comp expense, amortization of acquisition-related intangibleassets, non-cash economic interest expense and related tax adjustments and valuation allowance.

Total Revenue $875M$950M L&R revenue $80M$90M

Product revenue $785M$870M Prod GM%(1): 31% +/- 3 points

Total GM%(1): 37% +/- 3 points

Opex(1): $175$185M

Other Income(1)

: ~$10M Tax rate(1): 37%

Total Revenue of $925M$1.0B Upside in product revenue

Prod GM%(1): 34% +/- 2 points

Total GM%(1): 40% +/- 2 points

Opex(1): no change

Other Income(1)

: no change Tax rate(1): no change

JAN 28, 2010 GUIDANCE FEB 26, 2010 UPDATE

g p

OEM demand stronger than previously expected

SUMMARY: A PATH TO A PROMISINGFUTURE


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Growth and earnings power have returned Focused on balancing growth, profits and cash flow

Capital investments sized to enable growth andfree cash flow

LTFM helps guide our strategic decisions

Objective is to be in our LTFM in 2010


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THANK YOU


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ELIHARARIChairman and Chief Executive Officer


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Q&A

APPENDICES


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Basis of Presentation for Non-GAAP toGAAP Reconciliations

Non-GAAP to GAAP Reconciliationsfor Historical Results

Non-GAAP to GAAP Reconciliationsfor Forecasts

To supplement our condensed consolidated financial statements presented in accordance with generally accepted

BASIS OF PRESENTATION FOR GAAP TONON-GAAP OPERATING RESULTS


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To supplement our condensed consolidated financial statements presented in accordance with generally accepted

accounting principles (GAAP), we use non-GAAP measures of operating results, net income (loss) and net income(loss) per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses.These non-GAAP financial measures are provided to enhance the user's overall understanding of our currentfinancial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide usefulinformation to both management and investors as these non-GAAP results exclude certain expenses, gains andlosses that we believe are not indicative of our core operating results and because it is consistent with the financialmodels and estimates published by many analysts who follow the Company. For example, because the non-GAAPresults exclude the expenses we recorded for share-based compensation, the amortization of acquisition-relatedintangible assets related to acquisitions of Matrix Semiconductor, Inc. in January 2006, msystems Ltd. in November2006 and MusicGremlin, Inc. in June 2008, the impairment of goodwill and acquisition-related intangible assets, andnon-cash economic interest expense associated with our cash-settled convertible debt, we believe the inclusion ofnon-GAAP financial measures provide consistency in our financial reporting. These non-GAAP results are some ofthe primary indicators management uses for assessing our performance, allocating resources and planning andforecasting future periods. Further, management uses non-GAAP information that excludes certain non-cashcharges, such as impairment of goodwill and acquisition-related intangible assets, amortization of purchasedintangible assets, share-based compensation and non-cash economic interest expense associated with our cash-settled convertible debt, as these non-GAAP charges do not reflect the cash operating results of the business or the

ongoing results. These measures should be considered in addition to results prepared in accordance with GAAP,but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may bedifferent than the non-GAAP measures used by other companies.

RECONCILIATION OF NON-GAAP TO GAAP STATEMENT OF OPERATIONSThree months ended April 2, 2006(in thousands, except percentages and per share amounts, unaudited)

SanDisk Purchase SanDisk

Consolidated % of Share -base d Accounting Consolidate d % of

Non-GAAP Re ve nue Compensation Adjustments GAAP Revenue


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Product revenue 537,728$ 86.3% -$ -$ 537,728$ 86.3%

License and royalty revenue 85,532 13.7% - - 85,532 13.7%

Total revenues 623,260 100.0% - - 623,260 100.0%

Cost of product revenues 384,867 61.8% - - 384,867 61.8%

Total cost of product revenues 384,867 61.8% - - 384,867 61.8%

Product gross profit 152,861 28.4% - - 152,861 28.4%

Gross profit 238,393 38.2% - - 238,393 38.2%

Research and development 54,976 8.8% 8,786 - 63,762 10.2%

Sales and marketing 39,336 6.3% 4,039 - 43,375 7.0%

General and administrative 24,055 3.9% 5,961 - 30,016 4.8%

Write-off of acquired in-process technology - 0.0% - 39,600 (a) 39,600 6.4%Amortization of acquisition- related intangible assets - 0.0% - 3,715 (b) 3,715 0.6%

Total operating expenses 118,367 19.0% 18,786 43,315 180,468 29.0%

Operating income 120,026 19.3% (18,786) (43,315) 57,925 9.3%

Total other income 18,464 3.0% - - 18,464 3.0%

Income before taxes 138,490 22.2% (18,786) (43,315) 76,389 12.3%

Provision for income taxes 48,472 7.8% (5,845) (c) (1,353) (c) 41,274 6.6%

Net income 90,018$ 14.4% (12,941)$ (41,962)$ 35,115$ 5.6%

Net income per share, diluted 0.44$ 0.17$

Diluted shares used in computing net income per share 203,302 201,892

Effective tax rate 35.0% 54.0%

(a) Write-off of acquired in-process technology associated with the Matrix acquisition (January 2006).

(b) Amortization of acquisition-related intangible assets, primarily core and developed technology related to acquisitions of Matrix Semiconductor, Inc. (January 2006).

(c) Income taxes associated with certain non-GAAP adjustments.

RECONCILIATION OF NON-GAAP TO GAAP STATEMENT OF OPERATIONSThree months ended July 2, 2006(in thousands, except percentages and per share amounts, unaudited)

SanDisk Purchase Convertible SanDisk

Consolidated % of Share-based Accounting Debt Consolidated % of

Non-GAAP Revenue Compensation Adjustments Inte rest GAAP (d) Revenue

d 636 6 5$ $ $ $ 636 6 5$


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Product revenue 636,675$ 88.5% -$ -$ -$ 636,675$ 88.5%

License and royalty revenue 82,510 11.5% - - - 82,510 11.5%

Total revenues 719,185 100.0% - - - 719,185 100.0%

Cost of product revenues 427,699 59.5% 2,478 - - 430,177 59.8%

Total cost of product revenues 427,699 59.5% 2,478 - - 430,177 59.8%

Product gross profit 208,976 32.8% (2,478) - - 206,498 32.4%

Gross profit 291,486 40.5% (2,478) - - 289,008 40.2%

Research and development 63,364 8.8% 10,421 - - 73,785 10.3%

Sales and marketing 39,942 5.6% 5,125 - - 45,067 6.3%

General and administrative 29,336 4.1% 7,846 - - 37,182 5.2%

Amortization of acquisition- related intangible assets - 0.0% - 4,432 (a) - 4,432 0.6%

Total operating expenses 132,642 18.4% 23,392 4,432 - 160,466 22.3%

Operating income 158,844 22.1% (25,870) (4,432) - 128,542 17.9%

Total other income 22,013 3.1% - - (5,734) (c) 16,279 2.3%

Income before taxes 180,857 25.1% (25,870) (4,432) (5,734) 144,821 20.1%

Provision for income taxes 63,299 8.8% (6,667) (b) (1,718) (b) (1,855) (b) 53,059 7.6%

Net income 117,558$ 16.3% (19,203)$ (2,714)$ (3,879)$ 91,762$ 12.5%




(a) Amortization of acquisition-related intangible assets, primarily core and developed technology related to acquisition of Matrix Semiconductor, Inc. (January 2006).

(b) Income taxes associated with certain non-GAAP adjustments.

(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's cash-settled convertible debt.

(d) As adjusted for the retroactive adoption of new accounting requirements, effective December 29, 2008, relating to non-cash economic interest expense associated with the Company's cash-settled convertible debt.

RECONCILIATION OF NON-GAAP TO GAAP STATEMENT OF OPERATIONSThree months ended October 1, 2006(in thousands, except percentages and per share amounts, unaudited)



Non-GAAP Revenue Compensation Adjustments Interest GAAP (d) Revenue

Product revenue 673 189$ 89 6% $ $ $ 673 189$ 89 6%


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Product revenue 673,189$ 89.6% -$ -$ -$ 673,189$ 89.6%

License and royalty revenue 78,196 10.4% - - - 78,196 10.4%Total revenues 751,385 100.0% - - - 751,385 100.0%

Cost of product revenues 452,724 60.3% 2,621 - - 455,345 60.6%

Total cost of product revenues 452,724 60.3% 2,621 - - 455,345 60.6%

Product gross profit 220,465 32.7% (2,621) - - 217,844 32.4%

Gross profit 298,661 39.7% (2,621) - - 296,040 39.4%







Total other income 32,223 4.3% - - (10,706) (c) 21,517 2.9%


Provision for income taxes 66,561 8.9% (7,621) (b) (1,671) (b) (3,464) (b) 53,805 7.6%

Net income 123,614$ 16.5% (17,572)$ (2,761)$ (7,242)$ 96,039$ 12.3%




(a) Amortization of acquisition-related intangible assets, primarily core and developed technology related to acquisition of Matrix Semiconductor, Inc. (January 2006).

(b) Income taxes associated with certain non-GAAP adjustments.

(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's cash-settled convertible debt.

(d) As adjusted for the retroactive adoption of new accounting requirements, effective December 29 , 2008, relating to non-cash economic interest expense associated with the Company's cash-settled convertible debt.


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RECONCILIATION OF NON-GAAP TO GAAP STATEMENT OF OPERATIONSTwelve months ended December 31, 2006(in thousands, except percentages and per share amounts, unaudited)



Non-GAAP Re ve nue Compe ns ation Adjus tme nts Interes t GAAP (e ) Revenue

Product revenue 2,926,472$ 89.8% -$ -$ -$ 2,926,472$ 89.8%


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License and royalty revenue 331,053 10.2% - - - 331,053 10.2%Total revenues 3,257,525 100.0% - - - 3,257,525 100.0%

Cost of product revenues 1,995,222 61.2% 7,991 4,471 - 2,007,684 61.6%

Amortization of acquisition- related intangible assets - - - 10,368 (a) - 10,368 0.3%

Total cost of product revenues 1,995,222 61.2% 7,991 14,839 - 2,018,052 62.0%

Product gross profit 931,250 31.8% (7,991) (14,839) - 908,420 31.0%

Gross profit 1,262,303 38.8% (7,991) (14,839) - 1,239,473 38.0%




Write-off of acquired in-process technology - 0.0% - 225,600 (b) - 225,600 6.9%




Total other income 104,374 3.2% - - (27,353) (d) 77,021 2.4%


Provision for income taxes 264,741 8.1% (27,822) (c) (6,726) (c) (8,850) (c) 221,343 6.8%

Income after tax 524,479 16.1% (72,819) (251,145) (18,503) 182,012 5.6%

Non-controlling interests 1,619 0.0% - - - 1,619 0.0%

Net income 522,860$ 16.1% (72,819)$ (251,145)$ (18,503)$ 180,393$ 5.5%




(a) Amortization of acquisition-related intangible assets , primarily core and developed technology related to acquisitions of Matrix Semiconductor, Inc. (J anuary 2006) and msystems Ltd. (November 2006).

(b) Write-off of a

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