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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended January 2, 2005 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934 |
Commission File No. 0-26734
SANDISK CORPORATION
(Exact name of Registrant as specified in its charter)
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Delaware
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77-0191793 |
(State or other jurisdiction of
incorporation or organization) |
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(IRS Employer
Identification No.) |
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140 Caspian Court,
Sunnyvale, California
(Address of principal executive office) |
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94089
(Zip Code) |
Registrant’s telephone number, including area code:
(408) 542-0500
Securities registered pursuant to Section 12(b) of the
Act:
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Name of Each Exchange on Which Registered |
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None
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None |
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, $0.001 par value;
Rights to Purchase Series A, Junior Participating
Preferred Stock
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K. o
Indicate by check mark whether the Registrant is an accelerated
filer (as defined in Exchange Act
Rule 12b-2). Yes þ No o
The aggregate market value of common equity held by
non-affiliates, as of June 25, 2004, was approximately
$2,865,000,000. Shares of common stock held by each executive
officer, director and each person known to us to be the holder
of 5% or more of the outstanding common stock were excluded from
this calculation in that such persons may be deemed to be
affiliates. This determination of affiliate status is not
necessarily conclusive for other purposes.
As of March 1, 2005, we had 180,857,543 shares of
common stock outstanding.
Portions of our proxy statement for our 2005 annual meeting of
stockholders to be held on May 27, 2005 are incorporated by
reference into Part III of this Form 10-K.
SANDISK CORPORATION
Table of Contents
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PART I
Statements in this report, which are not historical facts,
are forward-looking statements within the meaning of the federal
securities laws. These statements may contain words such as
“expects,” “anticipates,”
“intends,” “plans,” “believes,”
“seeks,” “estimates” or other wording
indicating future results or expectations. Forward-looking
statements are subject to risks and uncertainties. Our actual
results may differ materially from the results discussed in
these forward-looking statements. Factors that could cause our
actual results to differ materially include, but are not limited
to, those discussed under “Factors That May Affect Future
Results” in Item 7 of this report and elsewhere in
this report. Our business, financial condition or results of
operations could be materially adversely affected by any of
these factors. We undertake no obligation to revise or update
any forward-looking statements to reflect any event or
circumstance that arises after the date of this report.
References in this report to “SanDisk®,”
“we,” “our,” and “us” collectively
refer to SanDisk Corporation, a Delaware corporation, and its
subsidiaries. All references to years or annual periods are
reference to our fiscal years, which consisted of 52 weeks
in 2002 and 2003 and 53 weeks in 2004.
Overview
Who We Are. We are the worldwide leader in flash storage
card products. We design, develop and market flash storage card
products used in a wide variety of consumer electronics. Flash
storage allows data to be stored in a compact format that
retains the data for an extended period of time after the power
has been turned off. Our flash storage card products enable
mass-market adoption of digital cameras, feature phones and
other digital consumer devices. Our products include flash
cards, Universal Serial Bus, or USB, flash drives and digital
audio players.
Our Strategy. Our strategy is to identify current and
emerging mass consumer markets for flash storage card products
and to manufacture in high volumes and sell all major flash
storage card formats for our target markets, enabling us to be a
one-stop-shop for our retail and original equipment
manufacturer, or OEM, customers.
We believe the market for flash storage is price elastic. From
2002 to 2004, we increased the number of megabytes sold nine
fold, in large measure due to a decrease of 63% in our average
selling price per megabyte over the same period. Our management
team believes that more applications for flash storage will be
created through the continued increase in the number of
megabytes a consumer can purchase at a given price point. The
dynamics of these price declines driving increased volume
resulted in an increase in our product revenues from
$493 million in 2002 to $1.6 billion in 2004.
We create new markets for flash memory. Together with Matsushita
Electric Industries., Ltd., or Matsushita, which owns the
Panasonic brand, and a subsidiary of Toshiba Corporation, or
Toshiba, we launched the Secure Digital card, or
SDtm
card, which is currently the most popular form factor of flash
storage cards. We followed that effort by working with mobile
network operators such as NTT DoCoMo and handset manufacturers
such as NEC and Panasonic to develop the
miniSDtm
card and
TransFlashtm,
even smaller form factor memory cards. Our market driving
efforts now include the
U3tm
initiative, in which software developers will be enabled to
transform USB drives from a simple mass storage device to a
platform for on-the-go computing. While we continue to serve
mass markets, we are broadening our product offering to include
system solutions that add value for end-users in specific fields
such as education. We are working with device manufacturers,
infrastructure and copyright owners and software developers in
developing these emerging markets, which we believe will be the
future of flash storage products.
We develop and own leading-edge technology and patents for flash
memory and data storage cards. Our research and development
spending was $125 million in 2004. Our team has a deep
understanding of flash memory. We own or control patents,
know-how and other intellectual property covering the design,
manufacturing and operation of flash memory and flash memory
cards. One of the key technologies that
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we have patented and successfully commercialized to date is
multi-level cell technology, or MLC, which allows a flash memory
cell to be programmed to store two or more bits of data in
approximately the same area of silicon that is typically
required to store one bit of data. This technology is a very
important factor in our ability to reduce the cost of our flash
memory. Our patent portfolio consists of over 279 issued patents
and has been licensed by four of the five largest semiconductor
companies. Our license and royalty revenues over the last three
years cumulatively were over $320 million.
We have partnerships with key participants in the markets for
feature phones, such as camera phones and MP3 phones, as well as
other digital consumer devices. We are founders or co-founders
of most major form factors of flash storage cards in the market
today. We co-own the Memory Stick
PROtm
format with Sony Corporation, or Sony, worked with Canon, Inc.,
or Canon, to co-found CompactFlash®, worked with Matsushita
and a subsidiary of Toshiba to co-found the SD card, and with
Nokia Corporation, or Nokia, and Siemens A.G., or Siemens, to
co-found
MultiMediaCardtm,
or MMC. We co-developed miniSD with NTT DoCoMo, Inc., Toshiba
and Matsushita and pioneered TransFlash in collaboration with
Motorola, Inc., or Motorola. We plan to continue to work with
leading companies in mobile communications and digital consumer
devices to find additional ways for flash storage card products
to enable proliferation of those technologies.
We are investing with Toshiba in high volume state-of-the-art
flash manufacturing facilities in Japan. Our commitment takes
the form of capital investments and loans to the ventures,
credit enhancements of the ventures’ leases of
semiconductor manufacturing equipment, commitments, on a
take-or-pay basis, to purchase 50 percent of the
output of the ventures at manufacturing cost and sharing in the
cost of SanDisk-Toshiba joint research and development
activities related to flash memory. We supplement our sourcing
of flash memory from the Toshiba ventures with purchases of
memory on favorable terms from Renesas Technology Corporation,
or Renesas, Samsung Electronics Corporation, or Samsung, and
Toshiba. Additionally, we design in-house and fabricate at
third-party foundries the controllers which interface between
the flash memory and digital consumer devices. Our team manages
a network of contract manufacturers that assemble and test our
flash memory and cards according to our specifications. Our
finished goods are fulfilled either by direct shipment to OEMs,
like Sony Ericsson Mobile Communications Japan, Inc., or Sony
Ericsson, or through regional fulfillment centers that ship to
our retail customers.
We sell our product globally to retail and OEM customers. We
intend to continue to expand our retail customer base to
additional new geographic regions as well as to new outlets such
as supermarkets and drug stores. We also seek to strengthen our
current retailer relationships and establish exclusive
arrangements where practical. In North America, we sell our
products principally through retailers, such as Best Buy
Company, Inc., Circuit City Stores, Inc. and Costco Wholesale
Corporation. In North America and the rest of the world, we
manage a network of distributors who cover other retailers. We
also are growing our separate network of distributors
specifically focused on the cellular phone market. The combined
effect of these channels is over 100,000 retail storefronts
where consumers may purchase SanDisk products. We have long
standing relationships with manufacturers representatives and
with industrial distributors like Arrow Electronics, Inc. and
Bell Microproducts, Inc. who focus on OEM opportunities. Our
direct sales force calls on key OEM accounts whether in the
mobile communications field, like Motorola and NEC Corporation,
or NEC, or manufacturers of other digital consumer products,
like Canon and Nikon, Inc.
Additional Information. We were incorporated in Delaware
in June 1988 under the name SunDisk Corporation and changed our
name to SanDisk Corporation in August 1995. We file reports and
other information with the Securities and Exchange Commission,
or SEC, including annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and
proxy or information statements. Those reports and statements as
well as all amendments to those documents filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act (1) may be read and copied at the SEC’s
public reference room at 450 Fifth Street, N.W.,
Washington, DC 20549, (2) are available at the SEC’s
internet site (http://www.sec.gov) which contains reports, proxy
and information statements and other information regarding
issuers that file electronically with the SEC and (3) are
available free of
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charge through our website as soon as reasonably practicable
after electronic filing with, or furnishing to, the SEC.
Information regarding the operation of the SEC’s public
reference room may be obtained by calling the SEC at
1-800-SEC-0330. Our website address is www.sandisk.com.
Information on our website is not incorporated by reference nor
otherwise included in this report. Our principal executive
offices are located at 140 Caspian Court, Sunnyvale, California
94089 and our telephone number is (408) 542-0500.
“SanDisk” is a registered trademark of SanDisk
Corporation. All other trade names used in this report are
trademarks of their respective holders.
Description of Our Business
Industry Background. The digital computing industry
includes traditional computers and consumer electronic,
communications and industrial products. We focus our products on
digital consumer devices like digital cameras, feature phones,
personal digital assistants, or PDAs, personal computers,
portable digital audio players and digital video recorders, as
well as industrial devices, like communication routers and
switches. The storage requirements of these applications include
small form factor size, high reliability and storage capacity,
low power consumption and the capability to withstand high
levels of shock and vibration and extreme temperature
fluctuations.
The flash memory market is primarily comprised of NOR and NAND
technologies. NOR is characterized by fast read speeds and
generally has a higher cost per megabyte than NAND flash. We are
focused on NAND-based products. NAND flash memory is
traditionally used for embedded and removable data storage and
is characterized by fast write speeds, high capacity and lower
manufacturing cost than NOR flash memory.
Our Primary Markets. We currently focus primarily on four
digital consumer markets: digital cameras and other consumer
devices, feature phones, USB flash drives and digital audio
players.
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Digital Cameras and Other Consumer Devices. Shipments of
digital cameras exceeded shipments of traditional film cameras
in 2003 and 2004. The resolution quality of digital cameras has
improved requiring flash storage cards with greater capacity. We
make and sell flash storage cards that are used as the film for
all major brands of digital cameras. Our cards are also used to
store video in solid-state digital camcorders, personal data in
PDAs, maps in global positioning system, or GPS, receivers and
music in digital audio players. |
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Feature Phones. Feature phones are phones that contain
one or more multimedia features such as camera functionality,
audio/ MP3, games, video or internet access. These features
require increasing storage capacity in the phone. We are a
leading supplier of miniSD, SD, TransFlash, MMC and reduced
sized MMC, or RS-
MMCtm,
cards for removable storage in many of these feature phones. |
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USB Flash Drives. USB flash drives allow consumers to
store computer files on keychain-sized devices and then quickly
and easily transfer these files between laptops, desktops and
other devices. We believe USB flash drives will be a key factor
in the evolution of mobile computing. In 2004, we announced our
collaboration with M-Systems Flash Disk Pioneers, Ltd., or
M-Systems, on the U3 platform, which is designed to make the USB
drive a platform for on-the-go computing. |
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Digital Audio Players. Digital audio players allow
consumers to download, store and play music. In 2004, we
introduced a digital audio player with embedded flash memory and
storage capacity of up to 1 gigabyte or 32 hours of
music. |
In July 2004, Semico Research Corporation estimated the size of
the flash storage card market, measured in revenues, to be
approximately $7.5 billion for 2004 and also estimated that
the market would grow to $34.3 billion by 2008. In November
2004, Gartner, Inc. estimated the size of the USB Flash Drive
market to be approximately $1.4 billion for 2004 and also
estimated that the market would grow to $3.1 billion by
2008. In December 2004, IDC estimated the size of the worldwide
portable flash digital audio player market would grow from
approximately $2.7 billion for 2004 to $4.3 billion in
2008.
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Our Sales Channels. Our products are available to
end-users at over 100,000 retail storefronts around the globe
and as data storage cards bundled with host products by our OEM
customers. We market our products under the SanDisk brand in the
retail channel using a direct sales organization, distributors
and manufacturers’ representatives. We also sell products
to OEM customers on a private label basis. Our sales efforts are
organized as follows:
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Retail. We ship SanDisk brand name products directly to
consumer electronics stores, office superstores, photo
retailers, mobile phone stores, mass merchants, catalog and mail
order companies, internet and e-commerce retailers, drug stores,
supermarkets and convenience stores and selected retail
distributors. Sales to retailers often involve complex selling
arrangements, see “Item 7-Management’s Discussion
and Analysis of Results of Operations and Financial
Condition-Overview.” |
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We support our retail sales channels with both direct and
indirect sales representatives. We have four domestic retail
sales offices and have organized our sales efforts in the rest
of the world around three regional territories: Europe, Middle
East and Africa (headquartered in the Netherlands); Japan
(headquartered in Yokohama); and non-Japan Asia/ Pacific
(headquartered in Hong Kong), which we refer to as Asia Pacific.
Information regarding our sales by geography is included in
Note 4 to our consolidated financial statements included in
Item 8. |
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We also sell product to smaller retailers through distributors.
Our retail distributors include AVS Technologies, Inc.,
Duttenhofer GMBH & Co., Hama Corporation, Inc., Ingram
Micro, Inc., Princeton Technology Corporation and Wynit,
Inc., in addition to approximately 50 other distributors. |
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During 2004, we began building a separate distribution network
focused on the cellular phone market. Our distributors provide
us access to mobile network operator branded storefronts as well
as other retailers with significant mobile communications
offerings. We intend to continue to emphasize offering our
products throughout the mobile communication retail community as
an important driver of our planned growth in that market. |
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OEM. Our OEM customers include digital camera
manufacturers, mobile phone manufacturers and the manufacturers
of other digital consumer devices, such as GPS receivers. Our
products are sold directly to OEMs and through distributors. Our
OEM direct sales force is supported in its sales efforts by more
than 50 independent manufacturers’ representative firms.
These manufacturers’ representative firms sell our products
as well as products from other manufacturers. |
As of the end of 2004 and 2003, our backlog was $78.6 and
$78.7 million, respectively. The following table describes
the distribution of our net product revenues (in millions):
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Retail
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1,236.0 |
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632.1 |
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315.4 |
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OEM
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366.8 |
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350.2 |
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177.5 |
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The significance of our North American retail channel to our
business has resulted in our revenues being seasonally higher in
our fourth quarter holiday season. Our first and third quarters
have sometimes been seasonally lower than their preceding
quarters.
Our Customers. In 2004, 2003 and 2002, revenues from our
top 10 customers and licensees accounted for approximately 55%,
48% and 45% of our revenues, respectively. In each of those
years, no single customer or licensee accounted for greater than
10% of our total revenues. The composition of our major customer
base from year to year has changed over time, and we expect this
pattern to continue as our markets and strategy evolve. Sales to
our customers are generally made pursuant to purchase orders
rather than long-term contracts.
Our Products. Our products can be categorized by form
factor, performance and technology. Form factor generally
correlates with our targeted end-market.
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We make flash storage cards in three different performance
grades:
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Our Standard Products. Our products store information in
non-volatile memory cells that do not require power to retain
information. Our standard products are designed to tolerate
fluctuations in shock, vibration, temperature and humidity.
During read and write operations, our products use significantly
less power than rotating disk drives. At all other times, our
products require virtually no power. Depending upon the end
product using our flash storage card products, this can
translate into longer battery life. Our products utilize
sophisticated error detection and correction algorithms to
provide data reliability and endurance. We believe that the read
and write data rates of our products meet or exceed the read and
write data rates required today by the majority of consumer and
industrial/communications applications. |
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SanDisk Ultra® II Products. SanDisk
Ultra II products are a line of high-speed CompactFlash, or
CF, SD and Memory Stick PRO cards specifically designed for use
in high-performance digital cameras and feature phones. This
product line is targeted at advanced photographers who require
high-speed cards to quickly shoot many high resolution images.
Our Ultra II cards feature minimum sustained write speeds
of 9 megabytes per second. |
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SanDisk
Extremetm
Products. SanDisk Extreme products are a comprehensive
line of high-performance CF, SD and Memory Stick PRO cards
designed to meet performance levels dictated by professional
digital photographers, including the ability to withstand a wide
range of temperature extremes. Our Extreme III CF and SD
cards deliver minimum sustained write and read speeds of
20 megabytes per second. Our Extreme cards are designed to
operate in a wide range of temperature from minus 25 to 85
degrees Celsius, making them ideal for harsh shooting
conditions. All of our Extreme III products are also
bundled with
RescuePROtm,
a software program to help recover photos/files that are
accidentally deleted. |
We make many form factors of removable data storage cards as
well as USB flash drives and TransFlash semi-removable cards. In
addition, we recently introduced a line of flash digital audio
players. The principal form factors of our products are:
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CompactFlash. Our CF products are characterized by small
form factor, ruggedness, and low-power consumption. CF products
are well-suited for a range of small form factor consumer
applications, including digital still cameras, personal
communicators and audio recorders. CF cards are available in
capacities ranging from 32 megabytes to 8 gigabytes. Our CF
family of products accounted for 22%, 34% and 44% of our product
revenues in 2004, 2003 and 2002, respectively. |
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SD Card. The SD card provides content copyright
protection features. This form factor is used in digital
cameras, mobile phones, gaming devices, GPS receivers, PDAs and
digital audio players in the consumer electronics marketplace.
We offer SD cards in storage capacities of 32 megabytes to
2 gigabytes. Our SD card family of products accounted for
30%, 34% and 14% of our product revenues in 2004, 2003 and 2002,
respectively. |
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miniSD Card. The miniSD card is a smaller version of the
SD card which leverages the industry momentum and feature-set of
the standard SD card but is designed into a format targeted at
small feature phones. An optional full-size SD card adapter
allows miniSD to be used in full size SD card applications
thereby acting as a bridge to the large range of SD-based
consumer and telecommunications devices. Capacities range from
16 to 512 megabytes. |
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Memory Stick PRO/ Memory Stick PRO
Duo.tm
Co-developed with Sony, the Memory Stick PRO product line is
sold in capacities ranging between 128 megabytes to 2
gigabytes, depending on the format, and is used in digital
cameras, digital video camcorders, PDAs and televisions. Memory
Stick PRO and Memory Stick PRO Duo offer substantially improved
performance in higher write speeds and capacity, as compared
with the original Memory
Sticktm
line of products, as well as built-in
MagicGatetm
copyright protection. All products in our Memory Stick PRO
product line |
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meet the minimum standard performance of 15 megabits per second
for high-resolution recording of moving images. |
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Cruzer® USB Flash Drives. Our Cruzer USB
flash drives are available in capacities ranging from
128 megabytes to 4 gigabytes. Our Cruzers allow users to
transfer data files between any device with a USB port. Cruzers
offer a high-speed replacement for the floppy disk or other
removable media. In addition to our standard Cruzer family, our
Cruzer Titanium USB flash drive family is targeted at high-end
users. Cruzer Titanium is an extremely rugged USB Flash Drive
made from titanium and other metals. The Cruzer Titanium is one
of the fastest performing USB Flash Drives on the market and is
available in 512 megabyte and 1 gigabyte capacities. In
conjunction with M-Systems, we are developing U3 as a new
platform for USB drives. Our USB flash drive family of products
accounted for 14% of our product revenues in 2004. |
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RS-MMC. Our RS-MMC is designed for use in small Nokia,
Samsung or Siemens mobile phones. It is about half the size of a
standard MultiMediaCard and has the same simple low power
interface. This allows the RS-MMC to be used with an extender in
a full-size MMC slot. |
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TransFlash. TransFlash, introduced in 2004, is an
ultra-small removable flash memory storage format. TransFlash is
designed for new mobile phones that are compact yet
fully-featured with storage-intensive multimedia applications
such as digital cameras, video capture and playback, digital
audio players, video games, personal organizers, multimedia
message service, email and voicemail capabilities. TransFlash is
similar in size and function to embedded flash memory, but can
also be readily removed and upgraded to allow for a range of
memory capacities as well as interoperability with other
consumer electronics devices. |
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XD-Picture
Card.tm
In 2003, we began selling the xD-Picture Card format under
arrangements with Olympus Optical Co., Ltd. and Fuji Photo Film
Co., Ltd., or Fuji. The xD-Picture Card allows for rapid data
transfer, is ultra compact for the most portable device and is
compatible with all xD cameras. The xD-Picture Card is available
in capacities that range from 64 megabytes to
512 megabytes. |
We also utilize branding to differentiate our card products. For
example, our line of Shoot &
Storetm
card products are inexpensive, consumable flash memory cards
currently offered in approximately 50-picture (32 megabytes
at one mega pixel resolution) and approximately 100-picture
(64 megabytes at one mega pixel resolution) sizes.
Shoot & Store card products are standard cards
available in CF, SD and Memory Stick PRO formats. This line is
offered primarily through supermarkets, convenience stores and
drug stores.
We also offer a broad line of memory card readers, which provide
a fast, convenient way to transfer data between our memory card
products and a personal computer through a USB connection. The
SanDisk Photo Album rounds out our accessory line and provides
users with a very economical and simple way to view digital
photographs and multi-media slide shows on a television.
Technology. Since our inception, we have focused our
research, development and standardization efforts on developing
highly reliable, high-performance and cost-effective flash
memory storage products to address a variety of emerging
markets. We have been actively involved in all aspects of this
development, including flash memory process development, chip
design, controller development and system-level integration to
ensure the creation of fully-integrated, broadly interoperable
products that are compatible with both existing and newly
developed system platforms. We believe our core technical
competencies are in:
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high-density flash memory process, device, design and
reliability; |
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controller design; |
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system-level integration; |
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compact packaging; and |
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low-cost system testing. |
We have also initiated, defined and developed standards to meet
new market needs and to promote wide acceptance of the standards
through interoperability and ease-of-use.
To achieve compatibility with various electronic platforms
regardless of the host processors or operating systems used, we
developed new capabilities in flash memory chip design and
created intelligent controllers. We also developed an
architecture that can leverage advances in process technology
designed for scaleable, high-yielding, cost-effective and highly
reliable manufacturing processes. We design our products to be
compatible with industry-standard interfaces used in standard
operating systems for personal computers, feature phones and
smart phones, PDAs and other consumer and industrial products.
Our patented intelligent controller with its advanced defect
management system permits our flash storage card products to
achieve a high level of reliability and longevity. Each one of
our flash cards contains many millions of flash memory cells.
For example, our 4 gigabyte cards may contain as many as
35 billion storage cells. A failure in any one of these
cells or in a group or block of cells can result in loss of data
such as picture files, and this can occur several years into the
life of a flash storage card. The controller chip inside our
cards is designed to detect such defects and recover data under
most standard conditions.
Our research and development expenses were $125.0 million,
$84.2 million and $63.2 million in 2004, 2003 and
2002, respectively.
Patents and Licenses. We rely on a combination of
patents, trademarks, copyright and trade secret laws,
confidentiality procedures and licensing arrangements to protect
our intellectual property rights. See “Item 7-Factors
That May Effect Future Results-We may be unable to protect our
intellectual property rights, which would harm our business,
financial condition and results of operations.”
In 1988, we developed the concept of emulation of a hard disk
drive with flash solid-state memory. The first related patents
were filed by our president and chief executive officer
Dr. Eli Harari and exclusively licensed to us. As of the
end of 2004, we owned or had exclusive rights to approximately
279 United States patents, approximately 165 foreign patents,
approximately 297 patent applications pending in the United
States, and have foreign counterparts pending on many of the
applications in multiple jurisdictions. We intend to seek
additional international and United States patents on our
technology.
We currently have patent license agreements with several
companies including, among others, Intel Corporation, or Intel,
Lexar Media, Inc., or Lexar, Matsushita, Renesas, Samsung, Sharp
Electronics KK, or Sharp, Sony and Toshiba. From time-to-time,
we have also entered into discussions with other companies
regarding potential license agreements for our patents.
Trade secrets and other confidential information are also
important to our business. We protect our trade secrets through
confidentiality and invention assignment agreements.
Supply Chain. Our supply chain is an important
competitive advantage.
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| |
• |
Silicon Sourcing. All of our flash memory card products
require silicon wafers for the memory components and the
controller components. The majority of our memory is supplied
from the ventures with Toshiba and our Toshiba foundry
relationship. This represents captive supply and we are
obligated to take the output from the ventures with Toshiba. See
“— Ventures With Toshiba.” To a lesser
extent, we source memory on a foundry basis from Renesas and
Samsung. We are guaranteed supply of percentages of total output
by each of Renesas and Samsung, but are not obligated to use the
guaranteed supply until we give them an order for future
purchases. Our controller wafers are currently supplied by Tower
Semiconductor Ltd., or Tower, and United Microelectronics
Corporation, or UMC. We have a foundry agreement with Tower and
purchase from UMC on a purchase order basis. See
“Item 7-Factors That May Affect Future Results-We |
7
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depend on third-party foundries for silicon supply and any
shortage or disruption in our supply from these sources will
reduce our revenues, earnings and gross margins.” |
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| |
• |
Testing and Assembly. We sort and test our wafers at
Toshiba in Yokkaichi, Japan, and United Test Center, Inc., in
Taiwan. Our tested wafers are then shipped to our third-party
memory assembly subcontractors, including StatsChipPAC Ltd., or
StatsChipPAC, in China, and Silicon Precision Industries Co.,
Ltd., or SPIL, in Taiwan, and Sharp and Mitsui & Co.,
Ltd., both in Japan. Our packaged memory final test, card
assembly and card test is performed at SPIL, United Test Center,
ASE Group and DataFab Systems, Inc. in Taiwan, and StatsChipPAC
and Flextronics International, Ltd., or Flextronics, in China.
We believe our use of subcontractors reduces the cost of our
operations and gives us access to increased production capacity.
See, “Item 7-Factors That May Affect Future Results-We
depend on third-party subcontractors and our business could be
harmed if our subcontractors do not perform as planned.” |
Ventures With Toshiba
FlashVision. In May 2000, we invested in the FlashVision
venture, which operated in Manassas, Virginia until May 2002. In
April 2002, we and Toshiba agreed to consolidate the NAND wafer
fabrication manufacturing operations in Fabs 1 and 2 of
Toshiba’s Yokkaichi Operations in Japan, through a venture
named FlashVision, Ltd., or FlashVision.
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• |
Semiconductor Manufacturing Equipment. Toshiba owns the
wafer fabrication facilities, Yokkaichi Fabs 1 and 2, in
which FlashVision’s tools are installed. We have also
installed, in Yokkaichi Fabs 1 and 2, tools which we own
directly providing us with approximately 10% additional
capacity, on approximately the same terms as FlashVision. |
| |
| |
• |
Capitalization and Related Matters. We own 49.9% of
FlashVision and Toshiba owns 50.1% of FlashVision.
FlashVision’s funding takes the form of permanent capital
(38 billion Japanese yen in total) and loans (funded
one-half by each owner) from Toshiba and us. At the end of 2004,
our loans to FlashVision were 3.6 billion Japanese yen and
we are committed to fund an additional 7.0 billion Japanese
yen in 2005. FlashVision’s stated life will terminate in
December 2016, but may be terminated by Toshiba or by us by
notice given from May 16, 2008 to May 15, 2009. There
are other termination events described in the master agreement
and the operating agreement, which are exhibits to this report.
Those agreements should be read carefully in their entirety for
a comprehensive understanding of our rights and obligations. |
| |
| |
• |
Lease Facility. FlashVision sold and leased back from
Mizuho Leasing tools, which had an original book value of
37.9 billion Japanese yen. FlashVision has been making
lease payments and the remaining fixed lease payment obligation
was 23.1 billion Japanese yen at the end of 2004. Toshiba
guaranteed FlashVision’s performance of its obligations
under the lease facility and we agreed to reimburse Toshiba for
49.9% of its claims and associated expenses related to its
guarantee agreement, unless those claims resulted from
Toshiba’s failure to meet its obligations to FlashVision or
breach of Toshiba’s covenants with the lessors. We pay
Toshiba a credit enhancement fee for providing the direct
guarantee of FlashVision’s lease obligations. In May 2006,
FlashVision has the option of purchasing the tools from the
lessors. FlashVision is obligated to insure the equipment,
maintain the equipment in accordance with the
manufacturers’ recommendations and other customary terms to
protect the leased assets. The lease agreement contains
customary events of default for a Japanese lease facility. |
| |
| |
• |
Operations. FlashVision’s current production ramp
plan contemplates a technology transition from 90-nanometers to
70-nanometers in 2005. FlashVision sells wafers to Toshiba and
to us at manufacturing cost. FlashVision generates cash over
time as a result of being paid as part of manufacturing cost for
its non-cash depreciation expense. This cash is currently
expected to be used to fund expansion of FlashVision’s
flash memory manufacturing capacity and to repay loans from
Toshiba and us. We and Toshiba are each committed to take
50 percent of FlashVision’s wafer output, with each
company specifying the type of wafer in its allocation. |
8
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• |
Research and Development. We and Toshiba each have teams
that are currently working on the 70-nanometer designs. We and
Toshiba each pay the cost of our own design teams and 50% of the
wafer processing and similar costs associated with this direct
design of the flash memory. We also pay Toshiba for a portion of
its semiconductor company’s common research and development
activities. See Note 5 to our consolidated financial
statements included as Item 8 and the common R&D
participation agreement which is an exhibit to this report. That
agreement should be read carefully in its entirety in order to
more fully understand the details of our obligations. |
Flash Partners. In September 2004, the Flash Partners,
Ltd., or Flash Partners, venture was formed. The key elements of
the venture are:
|
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• |
Semiconductor Manufacturing Equipment. Toshiba has
constructed at its expense a new wafer fabrication facility,
Fab 3, at its Yokkaichi Operations. Flash Partners will
purchase and pay to install semiconductor manufacturing
equipment in Fab 3. Flash Partners has specified a plan for
ramping production to 62,500 300-millimeter wafers per month
over a period starting in 2005 and ending in 2008. Toshiba and
we are currently committed to fund Flash Partners infrastructure
up to a total of 15,000 wafers per month in 2005 and 2006, which
may be increased to meet market demand. |
| |
| |
• |
Capitalization and Related Matters. We own 49.9% of Flash
Partners and Toshiba owns 50.1% of Flash Partners. Flash
Partners’ funding from its parents will be structured as a
combination of permanent capital (currently estimated at
40.0 billion Japanese yen in total) and loans (funded
one-half by each owner) from us and Toshiba. As of
January 2, 2005, we estimate our minimum funding commitment
to be approximately 55 billion Japanese yen, of which we
believe 25 billion Japanese yen will be satisfied with the
portion of Flash Partners’ lease facility that we have
guaranteed as described below. Flash Partners has a stated life
of 15 years, but may be terminated by us or Toshiba by
notice given from April 1, 2011 to March 31, 2012. In
addition, we have a termination right that may be exercised by
notice between April 1, 2007 and March 31, 2008. There
are other termination events described in the master agreement
and the operating agreement which are exhibits to this report.
Those agreements should be read carefully in their entirety for
a comprehensive understanding of our rights and obligations. |
| |
| |
• |
Sale and Leaseback. Flash Partners intends to sell and
leaseback from a consortium of financial institutions
approximately one-half of its tools. In December 2004, Flash
Partners entered into a master lease agreement with these
financial institutions providing for up to 50 billion
Japanese yen of original lease obligations. There were no
amounts outstanding under the master lease agreement at the end
of 2004. We and Toshiba have each guaranteed, on a several
basis, 50% of Flash Partners’ obligations under the master
lease agreement. Flash Partners will draw individual tranches
under the lease agreements during 2005 and each individual draw
will have a four-year or five-year term as agreed by Flash
Partners and the lessors. Lease payments are due quarterly. At
the end of the lease term, Flash Partners has the option of
purchasing the tools from the lessors. Flash Partners is
obligated to insure the equipment, maintain the equipment in
accordance with the manufacturers’ recommendations and
other customary terms to protect the leased assets. The master
lease agreement contains customary events of default for a
Japanese lease facility and is an exhibit to this report. That
agreement should be read carefully in its entirety for a
comprehensive understanding of its terms and the nature of the
obligations we guaranteed. |
| |
| |
• |
Operations. Flash Partners’ current production ramp
plan contemplates technology transitions from 90-nanometers, to
70-nanometers and to 55-nanometers. Flash Partners currently
plans to deliver its first production wafers in the second half
of 2005. Toshiba employees will operate Fab 3, and we have
assigned a number of our employees in Japan to work in the wafer
production facility. Flash Partners will reimburse Toshiba for
its costs of running Fab 3 and for the depreciation cost of the
Fab 3 building and improvements. Flash Partners does not receive
any commitment from Toshiba as to wafer yield or any protection
from operational incidents. We and Toshiba are each committed to
take 50 percent of Flash Partners’ wafer output, with
each company specifying the type of wafer |
9
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in its allocation. Flash Partners will sell wafers to us and
Toshiba at a price equal to manufacturing cost. |
|
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Flash Partners is expected to generate cash over time as a
result of being paid as part of its manufacturing cost for its
non-cash depreciation expense. This cash is currently expected
to be used to fund expansion of Flash Partners’ flash
memory manufacturing capacity and ultimately to repay loans from
us and Toshiba. |
|
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• |
Research and Development. We and Toshiba each have teams
that are currently working in parallel on the 70-nanometer and
55-nanometer designs. Our research and development cost sharing
is similar to that of FlashVision. See Note 5 to our
consolidated financial statements included as Item 8 and
the common R&D participation agreement which is an exhibit
to this report. That agreement should be read carefully in its
entirety in order to more fully understand the details of our
obligations. |
We refer to our wafer purchases from the Toshiba ventures and
foundry arrangement with Toshiba as captive capacity as compared
with our market-priced purchases of flash memory from Samsung
and Renesas, which we refer to as non-captive capacity.
Competition
Our industry is very competitive. See “Item 7-Factors
That May Affect Future Results-We face competition from numerous
manufacturers and marketers of products using flash memory, as
well as from manufacturers of new and alternative technologies,
and if we cannot compete effectively, our results of operations
and financial condition will suffer.”
Our Key Competitive Advantages. We believe our key
competitive advantages in NAND flash products include:
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• |
Our intellectual property ownership, in particular our patent
claims and manufacturing know-how over MLC, provides a cost
advantage to ourselves and Toshiba; |
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• |
Through the ventures with Toshiba, we benefit from
Toshiba’s manufacturing and research and development
experience and expertise; |
| |
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• |
We manufacture and sell a broader range of card formats than any
of our competitors which gives us an advantage in obtaining
retail and OEM distribution; and |
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• |
Our captive NAND flash wafer supply enables us to control our
supply chain and provides cost advantages over our competitors
who only have contractual relationships with their suppliers. |
Semiconductor Competitors. Our primary semiconductor
competitors currently include our historical competitors
Renesas, Samsung and Toshiba. New competitors include Hynix
Semiconductor, Inc., or Hynix, Infineon Technologies, A.G., or
Infineon, Micron Technology, Inc., or Micron, and ST
Microelectronics N.V., or ST Micro, who began shipping NAND or
NAND-competitive memory in 2004. If any of these competitors
increase their memory output, it will likely result in a decline
in the prevailing prices for packaged NAND semiconductor
components. Additionally, manufacturers of NOR flash memory,
such as Intel and Spansion LLC, or Spansion, are attempting to
use their flash memory for traditional NAND applications, both
embedded and in data storage cards.
Card and USB Flash Drive Competitors. We compete with
manufacturers and resellers of flash memory cards and USB flash
drives. These companies purchase (or have captive supply of)
flash memory components and assemble memory cards. These
companies include, among others, Buffalo, Dane-Elec
Manufacturing, Delkin Devices, Inc., Fuji, Hagiwara Sys-Com Co.,
Ltd., Hama, I/ O Data Device, Inc., Infineon, Kingston
Technology Company, Inc., Kodak, Lexar, M-Systems, Matsushita,
Micron, Memorex Products, Inc., PNY Technologies, Inc., PQI
Corporation, Pretec Electronics Corporation (USA), Renesas,
Samsung, Sharp, Simple Technology, Inc., Sony, Toshiba and
Viking Components, Inc.
10
MP3 Players. Our new digital audio players face
competition from products offered by other companies, including
Apple Computer, Inc., or Apple, Creative Technologies, Ltd., or
Creative, iriver America, Inc., or iriver, Rio Digital Networks
North America, Inc., or Rio, and Samsung.
Other. There are other technologies that compete with our
product offerings. There are many companies that are attempting
to develop memory cells that use different designs and materials
than the semiconductors in the marketplace today. When these
technologies can be manufactured in high volume, they could have
a significant cost advantage over NAND memory technologies. We
also face competition from hard disk drives. Small hard disk
drives have a lower cost per megabyte today than does NAND
flash, however the minimum density is higher making the hard
disk drive expensive in applications that may not require as
much memory as the hard disk provides. The hard disk drives in
the market today also have significant power requirements and
are not as rugged as flash memory. The competitive disadvantages
of these other technologies may be reduced or eliminated over
time.
Employees
As of January 2, 2005, we had 876 full-time employees,
including 340 in research and development, 131 in sales and
marketing, 180 in general and administration and 225 in
operations. None of our employees are represented by a
collective bargaining agreement and we have never experienced
any work stoppage. We believe that our employee relations are
satisfactory.
Executive Officers
Our executive officers, who are elected by and serve at the
discretion of our Board of Directors, are as follows (all ages
are as of March 1, 2005):
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| Name |
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Age | |
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Position |
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Eli Harari
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59 |
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President, Chief Executive Officer and Director |
|
Sanjay Mehrotra
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46 |
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Executive Vice President and Chief Operating Officer |
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Nelson Chan
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43 |
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Executive Vice President and General Manager, Consumer and
Handset Business |
|
Judy Bruner
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|
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46 |
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|
Executive Vice President, Administration and Chief Financial
Officer |
Eli Harari, the founder of SanDisk, has served as President and
Chief Executive Officer and as a director of SanDisk since June
1988. Dr. Harari founded Wafer Scale Integration, a
privately held semiconductor company, in 1983 and was its
President and Chief Executive Officer from 1983 to 1986, and
Chairman and Chief Technical Officer from 1986 to 1988. From
1973 to 1983, Dr. Harari held various management positions
with Honeywell Inc., Intel Corporation and Hughes Aircraft
Microelectronics. Dr. Harari holds a Ph.D. in Solid State
Sciences from Princeton University and has more than 70 patents
issued in the field of non-volatile memories and storage
systems. Dr. Harari is a board member of Tower.
Sanjay Mehrotra co-founded SanDisk in 1988 and has served as our
Vice President of Engineering, Vice President of Product
Development, Director of Memory Design, and Product Engineering.
Mr. Mehrotra is currently Executive Vice President and
Chief Operating Officer. Mr. Mehrotra has more than
24 years of experience in the non-volatile semiconductor
memory industry including engineering and engineering management
positions at Intel Corporation, Seeq Technology, Integrated
Device Technology and Atmel Corporation. Mr. Mehrotra
earned B.S. and M.S. degrees in electrical engineering and
computer sciences from the University of California, Berkeley.
He also holds several patents and has published articles in the
area of non-volatile memory design and flash memory systems.
Nelson Chan brings more than 20 years of high-technology
marketing and engineering experience and has served as our Vice
President of Marketing, Senior Vice President, Worldwide Sales
and Marketing and Senior Vice President and General Manager,
Retail Business Unit. Mr. Chan is currently our Executive
Vice President and General Manager of our Consumer and Handheld
Business. Prior to joining us in 1992,
11
Mr. Chan held marketing and engineering positions at Chips
and Technologies, Inc., Signetics, and Delco Electronics.
Mr. Chan was one of the principal organizers of the
CompactFlash Association (CFA) and the MultiMediaCard
Association (MMCA). He is an officer and board member of the CFA
and a board member of the MMCA. He holds a B.S. in Electrical
and Computer Engineering from the University of California,
Santa Barbara and an M.B.A. from Santa Clara
University.
Judy Bruner has been our Chief Financial Officer and Executive
Vice President Administration since June 2004. She served as a
member of our board of directors from July 2002 to July 2004.
Ms. Bruner has over 25 years of financial management
experience, including serving as Senior Vice President and Chief
Financial Officer of palmOne, Inc., a provider of handheld
computing and communications solutions, from September 1999
until June 2004. Prior to palmOne, Ms. Bruner held
financial management positions with 3Com Corporation, Ridge
Computers and Hewlett Packard. Ms. Bruner also serves on
the board of directors of Ciphergen Biosystems, Inc.
Ms. Bruner holds a B.A. in Economics from the University of
California, Los Angeles and an M.B.A. from Santa Clara
University.
Our principal facilities are located in Sunnyvale, California.
We lease three adjacent buildings comprising approximately
205,000 square feet. These facilities house our corporate
offices, the majority of our engineering team, as well as a
portion of our sales, marketing, operations and corporate
services organizations. We occupy this space under lease
agreements that expire from November 2005 through July 2006. We
believe that our facilities will be adequate to meet our near
term needs and that additional space will be available as
required. We also lease sales offices in the United States,
Japan, Germany, the Netherlands, Hong Kong, Scotland and Sweden,
operation support offices in Taichung, Taiwan and Dongguan,
Shenzhen and Shanghai, China and design centers in Tefen,
Israel, Petah Tikva, Israel and East Kilbride, Scotland.
|
|
| ITEM 3. |
LEGAL PROCEEDINGS |
From time to time, it has been and may continue to be necessary
to initiate or defend litigation against third parties. These
and other parties could bring suit against us. See
“Item 7-Management’s Discussion and Analysis of
Financial Condition and Results of Operations-Factors That May
Influence Future Results.”
On or about August 3, 2001, the Lemelson Medical,
Education & Research Foundation, or Lemelson
Foundation, filed a complaint for patent infringement against us
and four other defendants. The suit, captioned Lemelson
Medical, Education, & Research Foundation, Limited
Partnership vs. Broadcom Corporation, et al., Civil
Case No. CIV01 1440PHX HRH, was filed in the United States
District Court, District of Arizona. On November 13, 2001,
the Lemelson Foundation filed an amended complaint, which made
the same substantive allegations against us but named more than
twenty-five additional defendants. The amended complaint alleges
that we, and the other defendants, have infringed patents held
by the Lemelson Foundation pertaining to bar code scanning
technology. By its complaint, the Lemelson Foundation requests
that we be enjoined from our allegedly infringing activities and
seeks unspecified damages. The case as to us was stayed pending
the outcome of litigation in the District Court of Nevada
related to the same Lemelson bar code scanning patents asserted
against us. In early 2004, the Nevada Court ruled that the
Lemelson bar code patents (as well as other Lemelson patents)
were invalid, not infringed and unenforceable. Lemelson has
appealed the Nevada court’s ruling to the United States
Court of Appeals for the Federal Circuit.
On October 31, 2001, we filed a complaint for patent
infringement in the United States District Court for the
Northern District of California against Memorex Products, Inc.,
Pretec Electronics Corporation, Ritek Corporation, and Power
Quotient International Co., Ltd. In the suit, captioned
SanDisk Corp. v. Memorex Products, Inc.,
et al., Civil Case No. CV 01-4063 VRW, we seek
damages and injunctions against these companies from making,
selling, importing or using flash memory cards that infringe our
U.S. Patent No. 5,602,987. The court granted summary
judgment of non-infringement in favor of defendants Ritek,
Pretec and Memorex and entered judgment on May 17, 2004.
The rulings do not affect
12
the validity of the patent. On June 2, 2004, we filed a
notice of appeal of the summary judgment rulings to the United
States Court of Appeals for the Federal Circuit.
On or about June 9, 2003, we received written notice from
Infineon Technologies AG, or Infineon, that it believes we have
infringed its U.S. Patent No. 5,726,601 (the ‘601
patent). On June 24, 2003, we filed a complaint against
Infineon for a declaratory judgment of patent non-infringement
and invalidity regarding the ‘601 patent in the United
States District Court for the Northern District of California,
captioned SanDisk Corporation v. Infineon Technologies
AG, a German corporation, et.al, Civil Case No. C 03
02931 BZ. On October 6, 2003, Infineon filed an answer and
counterclaim: (a) denying that we are entitled to the
declaration sought by the our complaint; (b) requesting
that we be adjudged to have infringed, actively induced and/or
contributed to the infringement of the ‘601 patent and an
additional patent, U.S. Patent No. 4,841,222 (the
‘222 patent). On August 12, 2004, Infineon filed an
amended counterclaim for patent infringement alleging that we
infringe U.S. Patent Nos. 6,026,002 (the ‘002 patent);
5,041,894 (the ‘894 patent); and 6,226,219 (the ‘219
patent), and omitting the ‘601 and ‘222 patents. On
August 18, 2004, we filed an amended complaint against
Infineon for a declaratory judgment of patent non-infringement
and invalidity regarding the ‘002, ‘894, and ‘219
patents.
On July 3, 2003, a purported shareholder class action
lawsuit was filed on behalf of United States holders of ordinary
shares of Tower as of the close of business on April 1,
2002 in the United States District Court for the Southern
District of New York. The suit, captioned Philippe de Vries,
Julia Frances Dunbar De Vries Trust, et al., v. Tower
Semiconductor Ltd., et al., Civil Case No. 03 CV
4999, was filed against Tower and a number of its shareholders
and directors, including us and Dr. Harari, who is a Tower
board member, and asserts claims arising under
Sections 14(a) and 20(a) of the Securities Exchange Act of
1934, as amended, and Rule 14a-9 promulgated there under.
The lawsuit alleges that Tower and certain of its directors made
false and misleading statements in a proxy solicitation to Tower
shareholders regarding a proposed amendment to a contract
between Tower and certain of its shareholders, including us. The
plaintiffs are seeking unspecified damages and attorneys’
and experts’ fees and expenses. On August 19, 2004,
the court granted our and the other defendants’ motion to
dismiss the complaint in its entirety with prejudice. On
September 29, 2004, plaintiffs appealed the dismissal to
the United States Court of Appeals for the Second Circuit.
On February 20, 2004, we and a number of other
manufacturers of flash memory products were sued in the Superior
Court of the State of California for the City and County of
San Francisco in a purported consumer class action
captioned Willem Vroegh et al. v. Dane Electric
Corp. USA, et al., Civil Case No. GCG-04-428953,
alleging false advertising, unfair business practices, breach of
contract, fraud, deceit, misrepresentation and violation of the
California Consumers Legal Remedy Act. The lawsuit purports to
be on behalf of a class of purchasers of flash memory products
and claims that the defendants overstated the size of the memory
storage capabilities of such products. The lawsuit seeks
restitution, injunction and damages in an unspecified amount.
On October 15, 2004, we filed a complaint for patent
infringement and declaratory judgment of non-infringement and
patent invalidity against STMicroelectronics N.V. and
STMicroelectronics, Inc. in the United States District Court for
the Northern District of California, captioned SanDisk
Corporation v. STMicroelectronics, Inc., et al.,
Civil Case No. C 04-04379JF. The complaint alleges that
STMicro’s products infringe one of our U.S. patents
and seeks damages and an injunction. The complaint further seeks
a declaratory judgment that we do not infringe several of
STMicro’s U.S. patents. By order dated January 4,
2005, the court stayed our claim that STMicro infringes the our
patent pending an outcome in the ITC action (discussed below).
On January 20, 2005, the court issued an order granting
STMicro’s motion to dismiss the declaratory judgment causes
of action. We intend to appeal this decision.
On February 4, 2005, STMicro filed two complaints for
patent infringement against us in the United States District
Court for the Eastern District of Texas, captioned
STMicroelectronics, Inc. v. SanDisk Corporation,
Civil Case No. 4-05CV44 and STMicroelectronics,
Inc. v. SanDisk Corporation, Civil Case
No. 4-05CV45, respectively. The complaints seek damages and
injunctions against unspecified SanDisk products.
13
On October 15, 2004, we filed a complaint under
Section 337 of the Tariff Act of 1930 (as amended) titled,
“In the matter of certain NAND flash memory circuits and
products containing same” in the United States
International Trade Commission, naming STMicroelectronics N.V.
and STMicroelectronics, Inc. as respondents. In the complaint,
we allege that STMicro’s NAND flash memory infringe
U.S. Patent No. 5,172,338 (the ‘338 patent), and
seek an order excluding their products from importation into the
United States. In the complaint, we allege that STMicro’s
NAND flash memory infringes the ‘338 patent and seeks an
order excluding their products from importation into the United
States. On November 15, 2004, the ITC instituted an
investigation pursuant to 19 U.S.C. Section 1337
against STMicro in response to our complaint.
|
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| ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS |
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal 2004.
PART II
|
|
| ITEM 5. |
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES |
Market For Our Common Stock and Related Stockholder
Matters
Our common stock is traded on the NASDAQ National Market under
the symbol “SNDK”. The information set forth below
gives retroactive effect to a 2-for-1 stock split, in the form
of a 100% stock dividend, effected on February 18, 2004.
The following table summarizes the high and low bid quotations
for our common stock as reported by the NASDAQ Stock Market.
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High | |
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Low | |
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2003
|
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|
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|
|
|
| |
First quarter
|
|
$ |
12.20 |
|
|
$ |
7.39 |
|
| |
Second quarter
|
|
$ |
20.73 |
|
|
$ |
8.21 |
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| |
Third quarter
|
|
$ |
34.08 |
|
|
$ |
19.00 |
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| |
Fourth quarter
|
|
$ |
43.15 |
|
|
$ |
26.60 |
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2004
|
|
|
|
|
|
|
|
|
| |
First quarter
|
|
$ |
36.35 |
|
|
$ |
23.49 |
|
| |
Second quarter
|
|
$ |
33.25 |
|
|
$ |
19.79 |
|
| |
Third quarter
|
|
$ |
28.70 |
|
|
$ |
19.28 |
|
| |
Fourth quarter
|
|
$ |
31.96 |
|
|
$ |
19.66 |
|
As of March 1, 2005, we had approximately 372 stockholders
of record. We have never declared or paid any cash dividends on
our common stock and do not expect to pay cash dividends on our
common stock in the foreseeable future.
Unregistered Sales of Equity Securities
On December 2, 2004, we issued approximately
212,000 shares of our common stock in connection with the
acquisition of a private company. These shares were issued to
the former stockholders of the private company in a transaction
not involving a public offering which was exempt from the
registration requirements of the Securities Act of 1933 under
Section 4(2) of that act.
Equity Compensation Plans
Information regarding our equity compensation plans is set forth
in Note 3 to our consolidated financial statements in
Item 8. On January 3, 2005, options to purchase an
additional 4,361,178 shares of our common stock, at an
exercise price of $24.18, were broadly issued to our employees
and are not reflected in Note 3 to our consolidated
financial statements.
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SELECTED FINANCIAL DATA |
SANDISK CORPORATION SELECTED FINANCIAL DATA
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Years Ended |
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January 2, |
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December 28, |
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December 29, |
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December 30, |
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December 31, |