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Sandisk: What's New?

 December 14, 2012 04:21 PM

(By Mani) SanDisk Corp. (NASDAQ: SNDK) announced a new $75million venture capital initiative for investments in start-ups with innovative solutions that address the enterprise storage market. These areas of investments are designed to manage large sets of data and cloud-based technologies

In conjunction with the new initiative, SanDisk stated its first investment with WHIPTAIL, a data storage company that designs quick, energy-efficient enterprise infrastructure equipment using flash memory technology. The effort to enrich enterprise solutions is consistent with past acquisitions including Pliant Technology, FlashSoft, and Schooner in the past 1.5 years.

[Related -SanDisk Corporation (SNDK) Q4 Earnings Preview: What To Watch?]

SanDisk is leading a $31million C-series round funding to WHIPTAIL, which offers two families of products including Accela and Invicta allowing for improved next-gen silicon storage arrays with benefits including highly scalable IOPS, reduced IT costs and low-latency.

"Its IP (WHIPTAIL's) includes its Racerunner OS acceleration software which decreases Write IO performance and endurance issues native to SSDs," RBC Capital Markets analyst Doug Freedman said in a note to clients.

The OS offers wear-leveling algorithms, which commits all writes across the entire array, avoiding hot spots and premature wear.

"By our estimates, the bits servicing the enterprise server market should grow at a 90% CAGR from 2011- 2014 in support of the need for more responsive data centers. We expect the total allocation of NAND bits into the enterprise market to grow from 2% of overall in NAND demand in 2011 to 5% in 2014," Freedman noted.

[Related -Fusion-IO, Inc. (FIO): Can Fusion-IO Q2 Results Cheer Street?]

Meanwhile, since the beginning of December, spot market pricing is tracking higher with 32Gb multi-level cell (MLC) by 11 percent and 64Gb MLC by 5 percent, driven by improving supply/demand balance after the impact of a month of November inventory burn.

"However, we believe there is still risk to oversupply in Q1 to pricing, which keeps us on the sidelines," Freedman said.

Milpitas, California-based SanDisk is a global leader in flash memory storage solutions, from research and development, product design and manufacturing to branding and distribution for OEM and retail channels. SanDisk's diverse product portfolio includes flash memory cards and embedded solutions used in smart phones, tablets, digital cameras, camcorders, digital media players, and other consumer electronic devices, as well as USB flash drives and solid-state drives (SSD) for the computing market.

Based on consensus estimates, shares of SanDisk currently trades at a 18.6x P/E multiple for 2012 estimated earnings and a 11.9x P/E multiple for 2013 earnings. This compares to SOX at 12.3x for 2012 estimated earnings and 10.7x for 2013E and the Semi peer group at 16.7x and 13.2x, respectively. In the past two years, its range has been from 6.1x to 12.7x, with an average 10.1x.



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