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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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Page 3 Investor Day | February 26, 2010
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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Page 4 Investor Day | February 26, 2010
ELIHARARIChairman and Chief Executive Officer
INVESTOR DAY MEETINGFebruary 26, 2010
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Page 5 Investor Day | February 26, 2010
TODAYS THEME:
IN THE COMING DECADE,
FLASH WILL BE BIGGERTHAN YOU THINK!
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Page 6 Investor Day | February 26, 2010
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
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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)
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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
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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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Page 11 Investor Day | February 26, 2010
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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Page 12 Investor Day | February 26, 2010
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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Page 14 Investor Day | February 26, 2010
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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Page 15 Investor Day | February 26, 2010
TECHNOLOGY,COMPETITION
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Page 16 Investor Day | February 26, 2010
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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Page 18 Investor Day | February 26, 2010
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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Page 19 Investor Day | February 26, 2010
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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Page 20 Investor Day | February 26, 2010
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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Page 21 Investor Day | February 26, 2010
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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Page 22 Investor Day | February 26, 2010
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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Page 23 Investor Day | February 26, 2010
GROWTH IN THE
COMING DECADE
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Page 24 Investor Day | February 26, 2010
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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Page 25 Investor Day | February 26, 2010
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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Page 26 Investor Day | February 26, 2010
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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Page 28 Investor Day | February 26, 2010
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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Page 29 Investor Day | February 26, 2010
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=0HNMJVRK6EFFC7P7X3BR8/7/2019 SanDisk-2010 Investor Report
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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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Page 33 Investor Day | February 26, 2010
SANJAY
MEHROTRAPresident & Chief Operating OfficerWELL POSITIONED FORPROFITABLE GROWTH
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Page 34 Investor Day | February 26, 2010
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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Page 36 Investor Day | February 26, 2010
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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Page 37 Investor Day | February 26, 2010
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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Page 40 Investor Day | February 26, 2010
SANDISK MOBILEPOINTS OF ENGAGEMENT:
BEST IN THE INDUSTRY
HandsetVendor
NetworkOperator
GlobalRetail
Embedded Bundled Bundled AftermarketAftermarket
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Page 41 Investor Day | February 26, 2010
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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Page 43 Investor Day | February 26, 2010
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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Page 44 Investor Day | February 26, 2010
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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Page 46 Investor Day | February 26, 2010
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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Page 47 Investor Day | February 26, 2010
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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Page 48 Investor Day | February 26, 2010
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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Page 50 Investor Day | February 26, 2010
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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Page 53 Investor Day | February 26, 2010
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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Page 54 Investor Day | February 26, 2010
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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Page 61 Investor Day | February 26, 2010
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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Page 64 Investor Day | February 26, 2010
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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Page 66 Investor Day | February 26, 2010
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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SANDISKS 2009 OEM REVENUE MIX
Mobile HandsetVendors
52%
Computing5%
Imaging & Gaming12%
Private Label Cards& Components13%
Mobile NetworkOperators
18%
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IMAGING & GAMING
SLR HD VIDEO ON SD MOBILE GAMING PMP
16 32 64GB+
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SANDISKS 2009 OEM REVENUE MIX
Mobile HandsetVendors
52%
Computing5%
Imaging & Gaming12%
Private Label Cards& Components
13%
Mobile NetworkOperators
18%
PRIVATE LABEL AND
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Page 76 Investor Day | February 26, 2010
PRIVATE LABEL ANDCOMPONENT BUSINESS
In 2009, SanDisk introduced a new business...
it represented 13% of our OEM business in 2009.
SANDISKS 2009 OEM REVENUE MIX
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Page 77 Investor Day | February 26, 2010
SANDISKS 2009 OEM REVENUE MIX
Mobile HandsetVendors
52%
Computing5%
Imaging & Gaming12%
Private Label Cards& Components
13%
Mobile NetworkOperators
18%
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MOBILE STORAGE GROWTH
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Page 79 Investor Day | February 26, 2010
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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SANDISKS 2009 OEM REVENUE MIX
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Page 81 Investor Day | February 26, 2010
SANDISKS 2009 OEM REVENUE MIX
Mobile HandsetVendors
52%
Computing5%
Imaging & Gaming12%
Private Label Cards& Components
13%
Mobile NetworkOperators
18%
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YOU CAN NEVER BE TOO THIN
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Page 83 Investor Day | February 26, 2010
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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Page 85 Investor Day | February 26, 2010
-
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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Page 86 Investor Day | February 26, 2010
8 of the 10Top Netbook MakersUse SanDisk Modular SSD
Revenue basis, Source: SanDisk Market Research
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Page 87 Investor Day | February 26, 2010
OEM offers tremendous growthopportunities which SanDisk isuniquely positioned to exploit.
SYSTEM DESIGN AT SANDISKS CORE
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Page 88 Investor Day | February 26, 2010
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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THE KEY TO X3 IS ADOPTION
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 ADOPTION
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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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Page 97 Investor Day | February 26, 2010
DAN
INBARSenior Vice President & General Manager,OEM Mobile & Imaging
STORAGE FOR MOBILE
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Page 98 Investor Day | February 26, 2010
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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Page 102 Investor Day | February 26, 2010
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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Page 103 Investor Day | February 26, 2010
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
SANDISK ADVANCED TECHNOLOGY
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SANDISK ADVANCED TECHNOLOGYUnleash the Full Potential of Embedded Managed NAND
Market Requirement
SANDISK ADVANCED TECHNOLOGY
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SANDISK ADVANCED TECHNOLOGYUnleash the Full Potential of Embedded Managed NAND
Market Requirement
43nm X2
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SANDISK ADVANCED TECHNOLOGY
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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
SANDISK ADVANCED TECHNOLOGY
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Page 112 Investor Day | February 26, 2010
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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SANDISK ADVANCED TECHNOLOGY
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Unleash the Full Potential of Embedded Managed NAND
SLCEmulation
SmartCaching
SmartCaching
Market Requirement
43nm X232nm X2
32nm X3
32nm X3 + AFM
AdaptiveFlash
Management(AFM) Bridgingthe Gap
High Performance Mode
SANDISK ADVANCED TECHNOLOGY
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Page 115 Investor Day | February 26, 2010
Unleash the Full Potential of Embedded Managed NAND
SLCEmulation
SmartCaching
SmartCaching
Market Requirement
43nm X232nm X2
32nm X3
32nm X3 + AFM
AdaptiveFlash
Management(AFM) Bridgingthe Gap
Leveraging X3 inEmbedded requiresadvanced system
technology
High Performance Mode
SANDISK ADVANCED TECHNOLOGY
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Unleash the Full Potential of Embedded Managed NAND
SLCEmulation
SmartCaching
SmartCaching
Market Requirement
43nm X232nm X2
32nm X3
32nm X3 + AFM
AdaptiveFlash
Management(AFM) Bridgingthe Gap
Leveraging X3 inEmbedded requiresadvanced system
technology
High Performance Mode
SMART MEMORY FOR SMART PHONES
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Page 117 Investor Day | February 26, 2010117
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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Page 118 Investor Day | February 26, 2010118
* 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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Page 119 Investor Day | February 26, 2010
PORTABLE NAVIGATION DEVICES
PORTABLE MEDIA PLAYERS
DVC
eREADERS
SMARTBOOKS/TABLETS
NETBOOKS
GAMING
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Page 121 Investor Day | February 26, 2010
THANK YOU
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Page 122 Investor Day | February 26, 2010
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
Page 124 Investor Day | February 26, 2010
iPHONE CHANGES
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Page 125 Investor Day | February 26, 2010
iPHONE CHANGES
EVERYTHINGTwo dramatic threats to carriers
which Flash can
significantly address
and SanDisk is uniquely
equipped to deliver
Page 125 Investor Day | February 26, 2010
STRATEGIC PAIN-POINTS
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Page 126 Investor Day | February 26, 2010
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
Page 126 Investor Day | February 26, 2010
STRATEGIC PAIN-POINTS
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WHAT CAN FLASH
DO TO HELP?
Page 128 Investor Day | February 26, 2010
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Page 129 Investor Day | February 26, 2010
TIME &
PLACE SHIFTING
Page 129 Investor Day | February 26, 2010
SHIFTING TIME AND PLACE IN A FLASH
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Page 130 Investor Day | February 26, 2010
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)
Page 130 Investor Day | February 26, 2010
CASE STUDY:
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Page 131 Investor Day | February 26, 2010
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
STORAGE MAKES THE PIPE SMARTER
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Page 134 Investor Day | February 26, 2010
CDNs moved content closer to the edge to
speed delivery and improve the userexperience
STORAGE MAKES THE PIPE SMARTER
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Page 135 Investor Day | February 26, 2010
Todays wireless networks are facing similar
last mile issues
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UNIQUELY
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Page 137 Investor Day | February 26, 2010
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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Page 139 Investor Day | February 26, 2010
SANDISK 2010
INVESTOR DAY MEETING
We are taking a short lunch break.
The Investor Day Meeting will resume shortly.
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Page 140 Investor Day | February 26, 2010
SHUKINIRSenior Vice President & General Manager,Retail Business
SANDISK RETAIL:LEADERSHIP WITH A PREMIUM
AGENDA
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Page 141 Investor Day | February 26, 2010
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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Page 144 Investor Day | February 26, 2010
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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Page 145 Investor Day | February 26, 2010
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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Page 147 Investor Day | February 26, 2010
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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Page 148 Investor Day | February 26, 2010
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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Page 150 Investor Day | February 26, 2010
SEGMENTIMAGING
Basic Point & ShootEveryday Consumer
Featured-Rich Point & ShootHigh MegapixelHigh Def Movie
HighEnd
Pro DSLR
ProsumerDSLR
EntryDSLR
SEGMENTATION PAYS OFF
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Page 151 Investor Day | February 26, 2010
30%
70%
Retail Imaging Revenue Units 2009
55%
45%
Margin $ From Retail Imaging 2009
High Performance Standard
ADDRESSING CONSUMER NEEDSCOMPUTING
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Page 152 Investor Day | February 26, 2010
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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Page 153 Investor Day | February 26, 2010
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
ADDRESSING CONSUMERUSE CASESMOBILE
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Page 155 Investor Day | February 26, 2010
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
ADDRESSING CONSUMERUSE CASESMOBILE
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Page 156 Investor Day | February 26, 2010
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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Page 157 Investor Day | February 26, 2010
SanDisk is the
premium brand inmemory cards in retail
SANDISK RECOGNIZEDAS LEADER BY CONSUMERS
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Page 158 Investor Day | February 26, 2010
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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Page 159 Investor Day | February 26, 2010
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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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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Page 181 Investor Day | February 26, 2010
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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Page 183 Investor Day | February 26, 2010
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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Source: Chart created by SanDisk based on data from iSuppli, data flash Q4 Market Tracker, 1209, and Gartner Flash Card Forecast 11/09
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
KEYS TO SUCCESS IN BRIC
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Products designed for thespecific market needs
KEYS TO SUCCESS IN BRIC
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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%
Net income per share, diluted 0.58$ 0.45$
Diluted shares used in computing net income per share 204,126 202,980
Effective tax rate 35.0% 36.6%
(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)
SanDisk Purchase Convertible SanDisk
Consolidated % of Share-based Accounting Debt Consolidated % of
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%
Research and development 67,803 9.0% 10,270 - - 78,073 10.4%
Sales and marketing 40,339 5.4% 4,622 - - 44,961 6.0%
General and administrative 32,567 4.3% 7,680 - - 40,247 5.4%
Amortization of acquisition- related intangible assets - 0.0% - 4,432 (a) - 4,432 0.6%
Total operating expenses 140,709 18.7% 22,572 4,432 - 167,713 22.3%
Operating income 157,952 21.0% (25,193) (4,432) - 128,327 17.1%
Total other income 32,223 4.3% - - (10,706) (c) 21,517 2.9%
Income before taxes 190,175 25.3% (25,193) (4,432) (10,706) 149,844 19.9%
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%
Net income per share, diluted 0.61$ 0.47$
Diluted shares used in computing net income per share 203,757 202,747
Effective tax rate 35.0% 35.9%
(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)
SanDisk Purchase Convertible SanDisk
Consolidated % of Share-based Accounting Debt Consolidated % of
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%
Research and development 265,867 8.2% 40,999 - - 306,866 9.4%
Sales and marketing 181,789 5.6% 21,617 - - 203,406 6.2%
General and administrative 129,801 4.0% 30,034 - - 159,835 4.9%
Write-off of acquired in-process technology - 0.0% - 225,600 (b) - 225,600 6.9%
Amortization of acquisition- related intangible assets - 0.0% - 17,432 (a) - 17,432 0.5%
Total operating expenses 577,457 17.7% 92,650 243,032 - 913,139 28.0%
Operating income 684,846 21.0% (100,641) (257,871) - 326,334 10.0%
Total other income 104,374 3.2% - - (27,353) (d) 77,021 2.4%
Income before taxes 789,220 24.2% (100,641) (257,871) (27,353) 403,355 12.4%
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%
Net income per share, diluted 2.51$ 0.87$
Diluted shares used in computing net income per share 208,661 207,451
Effective tax rate 33.5% 54.9%
(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