SUNNYVALE, CA, September 21, 2001-- SanDisk Corporation (NASDAQ:SNDK), announced today that due to severe pricing pressures from competition and deterioration in market conditions, it expects third quarter 2001 product revenues to decline approximately 35% sequentially from the $88 million reported in the prior quarter. Prior expectations were for product revenues in the third quarter 2001 to be unchanged from the second quarter.
Product gross margins are currently expected to be substantially lower than previously projected due primarily to the accelerated decline in average selling prices and lower unit volume. The Company currently expects that third quarter net loss from ongoing operations will be approximately $0.60 per share, compared to previous guidance of a loss of $0.10 to $0.15 per share.
"SanDisk continues to focus on product cost reductions through the transition of all production to the .16 micron NAND Flash at Dominion, Virginia and Yokkaichi, Japan. We expect to complete winding down the production of our NOR Flash products in the fourth quarter, which includes shutting down product manufacturing operations in Sunnyvale. These actions are expected to give us a lower product cost structure in the first quarter of 2002," said Dr. Eli Harari, President and CEO of SanDisk. "We are encouraged by the enthusiastic reception from our retail customers to our recent addition of the Memory Stick, which they view as highly complimentary to our retail products lineup. Despite the very challenging current conditions, we continue to believe that the drastic price declines will translate into an elastic increase in demand for our products once market conditions improve."
We assume no obligation to update the information in this release. This news release contains certain forward looking statements including our expectations for future product revenues and bookings, product demand, average selling prices, gross margin and earnings that are based on current expectations and involve risks and uncertainties that may significantly and adversely affect our business, financial condition and results of operations. In addition to the factors discussed above, other risks include: future average selling price erosion due to excess capacity and extreme price competition; increased expenses and fluctuations in operating results and yields related to the startup of wafer production at our FlashVision foundry joint venture in Virginia; the timely development, internal qualification and customer acceptance of new products based on the 512megabit .16 micron NAND flash chips that SanDisk is obligated to purchase from FlashVision; fluctuations in royalty revenues due to industry wide declines in demand for flash memory products which reduce royalty bearing sales of our licensees; the timely introduction and acceptance of new consumer products that incorporate our flash storage devices; slower than expected growth in the emerging markets for our products which may result in reduced sales and increased inventory; seasonality of product sales; the successful production and launch of our Secure Digital card products; economic conditions and exchange rates in Japan, the Pacific Rim, Europe and other geographic regions as they affect SanDisk's customers; the unknown economic impact of the recent terrorist attacks; and the other risks detailed from time to time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10Q for the quarter ended June 30, 2001 and the Annual Report on Form 10-K for the year ended December 31, 2000. Future results may differ materially from those previously reported.
SanDisk Corporation, the world's largest supplier of flash data storage products, designs, manufactures and markets industry-standard, solid-state data, digital imaging and audio storage products using its patented, high density flash memory and controller technology. SanDisk is based in Sunnyvale, CA.
SanDisk's third quarter 2001 conference call is scheduled for 2:00 p.m. PDT, Wednesday, October 17th. The phone number is (973) 872-3100. A webcast of the conference call be available on www.sandisk.com/q3results and on www.streetevents.com.
CompactFlash and CF are trademarks of SanDisk Corporation.