Flash memory storage vendor SanDisk Corp. (SNDK) recently unveiled its new USB 3.0 Flash Drive for PCs and other devices. The new drive comes in a smaller form factor and facilitates faster data transfer than its predecessor — USB 2.0 drives. The SanDisk Ultra Fit USB 3.0 Flash Drive is available in capacities of 16GB, 32GB and 64GB for $39.99, $69.99 and $109.99, respectively.
Also, SanDisk is making considerable efforts to push its client and enterprise solid state drive (SSD) products. This is an area with better growth prospects and a more stable pricing environment.
Enterprise class SSDs are faster and more energy efficient than traditional hard drives, which is the main factor driving the demand. They also occupy less space and are therefore more suitable for mobile computing devices.
SanDisk expects enterprise SSD total addressable market (TAM) to reach $8.0 billion in 2017 while the total addressable market for the enterprise SSD, Client SSD, embedded and removable SSD combined is expected to be $41.0 billion. Moreover, the company expects to generate approximately 40% of its revenues from SSD in 2017, up from 19% in 2013.
It is worth noting that SSD revenues jumped 97% on a year-over-year basis and comprised 29% of total revenue in the last reported quarter (second-quarter 2014), which is indicative of the company’s long-term prospects.
Moreover, the strategic acquisitions of Fusion-io Inc. and SMART Storage Systems are expected to expand SanDisk’s offerings in the Enterprise SSD segment. Nonetheless, declining price per gigabyte, primarily due to unfavorable product mix, could impact the company’s results.
Going forward, lackluster PC sales, competition from Micron Technology Inc. (MU), Western Digital (WDC) and currency fluctuations remain the headwinds. However, we remain positive on management’s commentary of a turnaround in the coming quarters and strong secular demand for its storage products.
It is also worth mentioning that Apple Inc. (AAPL) remains a major customer of SanDisk. Hence, we believe that with price and cost benefits as well as long-term NAND supply agreements with Apple will help SanDisk to outperform the NAND market.
Currently, SanDisk has a Zacks Rank #3 (Hold).
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