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SanDisk Corp. Message Board

  • sandiskrocks Mar 27, 2010 10:54 PM Flag

    Q1 numbers/Prediction on stock


    The fact is, Q1 will not be all that far off from Q4 numbers. We know that retail sales were likely 25% less than Q4, but if we look at those numbers, we're talking about $125 million less this quarter. SanDisk begin shipping to Apple in Q4 according to Daniel Amir of Lazard Capital. Analysts don't release that kind of information without a high source of reliability. Amir suggested in his article a almost two months ago that SanDisk sold $81 million to Apple during Q4 for both IPHONE and IPAD inital production(s) of the design wins they had. Of course that was just the start, and anything SanDisk builds and sells for Q1 would be for Q2 and early Q3 production of product for Apple. It's very feasible to say that SanDisk sold $125 million this quarter to Apple. In looking at white label cards sold to the Chinese relationships and wafers, SanDisk sold around $175 million in Q4 to these companies, and in Q3, sold around $60 million for that quarter but had only started this relationship in early September. Demand is extremely high right now, and there's no reason to believe why they shouldn't have done the same amount with them here in Q1 as well because that relationship is still growing, along with India. All in all, the numbers should look like this:

    Product revenue: $1.01-1.16 billion
    License and Royalty: $90 million
    Other Interest income: $10 million

    Now, for product gross margins. SanDisk had guided 34% + or -3% in their investor conference day. We know that Nand pricing was down right around 8% for the quarter, and SanDisk will likely follow suit. Cost reductions for the quarter should be 11%, which would support an increase over the 36.4% margins in Q4 going to 38% for Q1.

    Operating expenses have been coming down quarter over quarter. This is the one area that I pay close attention to because it is so critical to the bottom line. My estimates on operating expenses for the quarter are a range of $167-173 million. So, where does this leave EPS?

    EPS: .85-.90c on $1.1-1.15 billion for Q1

    Guidance: It appears from the IPAD launch coming and spot pricing on the rise as of late, Q2 pricing is going to be muted. Also, many new smart phones and netbooks are hitting the markets allowing for pricing to remain fairly firm. SanDisk will only have about 6% cost reductions in Q2, but I'm estimating that pricing will wind up being down only 5%. However, SanDisk will probably guide 36% product gross margins, plus or minus 2%. Not a big deal, the market will look past this because it will know by the time they report, Q2 pricing will be completely muted or as I said -5% only. This is just SanDisk being somewhat conservative, but not as conservative as they would have been in the past, so to speak. It's likely that Eli will mention the fact that he expects supply constraints in some fashion or another for the remainder of the year, and the need to utilize non-captive supply (Samsung) for more capacity.

    Analysts: In doing the numbers I mentioned above, analysts will have no choice but to raise full year estimates to around $3.75, and will probably move their total sales estimates to $4.9 billion. Judy will also update full year guidance likely to the average tune of $4.9 billion on 37% product gross margins. It's unclear to me what she will do about OPEX new guidance. I would have to say it will go up, and probably from the $720-760 million to guidance of $760-$810 million, but this is expected. Analysts with their new estimates will probably pick $790 million with their new estimates. I expect 2011 estimates to go over $4, and as the year unfolds, analysts will increase this number on supply/demand looking into 2011 in the fact that it will once again be constrained. No change in royalty revision, yet.

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