SanDisk Q2 Earnings Preview: What We’re Watching on Thursday

SanDisk (NASDAQ:SNDK) plans to announce its Q2 2011 earnings results tomorrow. For the quarter, we are keeping a close eye on growth in the solid state drives (SSDs) market, which is being supported by the rising popularity of tablets and the increased adoption of SSDs in PCs as well as enterprises storage solutions. In the past, mobile phone flash cards have been the largest value driver for SanDisk making up more than 50% of our $50.60 Trefis price estimate for SanDisk stock. SanDisk primary competitors include firms like Hynix (PINK:HXSCF), Micron (NASDAQ:MU), Samsung (LI:SAMS), STMicroelectronics (ADR:STM), Toshiba (PINK:TOSBF) and IM Flash (a joint venture of Micron and Intel).

Growing Smartphone Market Bodes Well for SanDisk

The fact that mobile phone flash card sales made up 50% of SanDisk’s revenues in 2010 makes the mobile market the most important aspect to look at in SanDisk’s upcoming Q2 11 earnings. In its Q1 11 earnings SanDisk reported nearly 40% growth in total unit sales of mobile products on a year-over-year basis, and we expect the momentum to continue in Q2 as well. If continued growth in smartphone market is something to go by, signs are good for SanDisk’s mobile product lineup.

Solid State Drives Gaining Popularity

The demand for SSDs has been on the rise with the increased adoption of tablets (which use SSD storage) among consumers. SanDisk reported strong tablet customer activity in Q1’11 with rising demand for 16 gigabyte and higher capacities of its embedded solutions for the market, which we expect to continue in Q2’11. With the recent acquisition of Pliant Technologies, SanDisk is now also targeting the enterprise storage solutions market where SSDs are quickly gaining popularity.

According to research firm iSuppli, SSD revenue in 2011 will reach $4.4 billion – up 91% from $2.3 billion in 2010. By 2014, iSuppli expects SSD revenue to reach $7 billion. ^[1] iSuppli predicts that the industry’s hottest segment in 2011 will be SSDs for consumer usage as shipments of SSD-fitted high-end notebooks skyrocket. The enterprise SSDs will be the other growth segment in 2011 with firms increasingly employing flash storage to overcome performance bottlenecks.

Despite this growth, SSD demand is still miniscule compared to demand for hard disk drives and thereby offer tremendous growth potential to SanDisk.

See our full analysis of SanDisk.

1. Solid State Drives to Boom in 2011 and Generate Over $4 Billion, iSuppli [↩]