Sandisk’s (SNDK) fourth quarter 2009 earnings of $1.18 per share exceeded the Zacks Consensus EPS by 56 cents.

Revenue

Total revenue for the quarter was $1.24 billion, up 44.0% on a year-over-year basis and up 33.0% on a sequential basis. Revenue for the quarter exceeded the company’s expectation of $1.1 billion and $1.2 billion, due to a substantial increase in Product revenue, although the decline in License & Royalty revenue was a spoiler.

This apart, the company’s results were positively impacted by higher OEM revenues from new channels, which are expected to continue in the next quarter. Retail sales were also strong in the quarter and witnessed growth in all end-markets.
 
Total revenue for the quarter included $1.14 billion in Product revenue (an increase of 54.0% year-over-year and 40.0% sequentially) and $99.6 million in License & Royalty revenue (down 18.0% year-over-year and 18.0% sequentially). The increase in Product revenue can be attributed to the increase in gigabytes sold. Gigabytes sales increased 100.0% year-over-year and 44.0% sequentially.

This apart, price per gigabyte was down 23.0% year over year and 2.0% sequentially. Total memory units sold in the fourth quarter was up 55.0% on a year-over-year basis and up 22.0% sequentially.

Operating Results

Product gross margin in the quarter was 45.0% on a non-GAAP basis versus product loss margin of 61.0% on a non-GAAP basis in the year-ago quarter. Product gross profit for the quarter included a $95.0 million benefit primarily from the sale of previously reserved inventory, and was positively impacted by stronger cost reductions which were 20% per gigabyte.

Product gross profit on GAAP basis for the third quarter was $510.0 million, compared to a product gross loss of $462.0 million in the year-ago quarter. Operating profit on GAAP basis was $376.0 million compared to a GAAP operating loss of $1.63 billion in the fourth quarter of 2008 while the company reported a non-GAAP operating profit of $417.0 million in the fourth quarter, compared to a non-GAAP operating loss of $568.0 million in the year-ago quarter.

Net income on a GAAP basis for the quarter was $340.0 million or $1.45 per share, compared to a GAAP net loss of $1.76 billion or $7.78 in the year-ago quarter. Including the amortization of acquisition-related intangible assets, non-cash economic interest expense, and related tax adjustments, non-GAAP net income for the quarter came in at $277.0 million or $1.18 per share versus a net loss of $359.0 million or $1.59 reported in the year-ago period. The latest quarter’s results were favorably impacted by higher OEM volumes, substantial reduction in cost of sales, modest pricing and improved industry fundamentals.

Balance Sheet

SanDisk generated $388.0 million in cash from operating activities, compared to $238.4 million in the third quarter. Cash and short-term investments were $1.91 billion compared to $1.45 billion at the end of the third quarter. Convertible long-term debt for the quarter was $934.7, an increase of $15.2 million from $919.5 million reported in the previous quarter. Long term investments during the fourth quarter stood at $1.09 billion.
 
Guidance
 
SanDisk is forecasting total revenue for the first quarter between 875 million, and 950 million, including License & Royalty revenue of between $80 million and $90 million. The License & Royalty revenue forecast for the first quarter includes revenues expected from the Samsung license agreement. For the full year 2010, the company expects total revenue between $4.0 billion and $4.4 billion, including license and royalty revenue between $320.0 million and $360.0 million.

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