Bank of America Merrill Lynch Global Technology Conference...

Bank of America Merrill Lynch Global Technology Conference

Sumit SadanaExecutive Vice President & Chief Strategy OfficerJune 5, 2013

June 5, 2013 2

Forward-Looking StatementDuring our meeting today we will be making forward-looking statements.

Any statement that refers to expectations, projections or other characterizations of future events or circumstances is a forward-looking statement, including those relating to revenue, unit sales, pricing, market positions, market growth, product sales, industry trends, expenses, gross margin or other financial measures, capital investments, cash flow, use of cash, customer relationships and partnerships, strategic investments and other strategic transactions, competition and competitive advantages, future memory and other technologies, production capacity, technology transitions and future products.

Actual results may differ materially from those expressed in these forward-looking statements including due to the factors detailed under the caption “Risk Factors” and elsewhere in the documents we file from time-to-time with the SEC, including our annual and quarterly reports.

Reconciliations between Non-GAAP and GAAP results presented are included in the appendix of the financial presentation.

We undertake no obligation to update these forward-looking statements, which speak only as of June 5, 2013.

Bank of America Merrill Lynch Global Technology Conference, San Francisco, CA

June 5, 2013 3

Agenda

SanDisk Overview

Current and Future NAND Growth Drivers

Technology & Capacity Planning

Financial Review


June 5, 2013 4

Global Leader in Flash Memory Storage Solutions


Global Retail Share Leader1 Out of 2 Cards Sold in the U.S.

The Leading Retail Brand In Key Markets

Technology LeadershipGlobal Operations

4,700+ Employees

RankingsFabs World Class

NAND Capacity19nm Leading Memory

Process Node4,500+ Patents

4 of the Top 7 Storage OEMs are

SanDisk Customers

Enterprise, Client and Retail SSDs

SanDisk Client SSD Design Wins at

11 Leading PC OEMsClose to Half of Industry Bit OutputTogether with Manufacturing Partner Toshiba°

All Leading Handset & Tablet Manufacturers Use SanDisk

Trailing 4 Qtr. Financials

$5.2B Revenue$4.3B Net Cash*$590M R&D*

Investment

* Net Cash = [Cash + cash equivalents + short-term & long-term marketable securities] less [debt at maturity value] as of the end of Q1-2013. R&D is non-GAAP, see appendix for non-GAAP to GAAP definitions and reconciliations. Financials, headcount and patent count as of the end of Q1, ’13. ° Gartner Forecast: NAND Flash Supply and Demand, Worldwide, 1Q’ 11-4Q ‘13, 3Q ‘12 Update, Dec., ‘12. NPD Estimate, Jan., ‘13. Estimates of the memory card & USB markets from NPD (Jan. ‘13) and GfK Retail and Technology, Oct.., ‘12.

June 5, 2013 5

Leading Provider of Storage Solutions through the Retail and Commercial Channels


Retail (38% of Q113 Revenue) Commercial (62% of Q113 Revenue)OEM, Enterprise and IP Revenue

30% of Retail Industry Revenue* 14% of Commercial Industry Revenue**

* Retail industry revenue comprised of cards, USB Flash Drives, SSDs sold through retail channels** Commercial industry revenue comprised of cards, USB Flash Drives, embedded products, SSDs, wafers and components sold through OEM and Enterprise channels

NAND Flash’s Legacy of Disruption…

…Continues in Enterprise Storage


June 5, 2013 7

Software Unlocks Flash Potential in the Enterprise

7

Flash + Software

New SAN Architecture

In-MemoryDatabases

ColdStorage

Big DataAnalytics

Virtualization &Cloud Computing

Server-sideCaching

Flash as replacement for 15k RPM HDD


June 5, 2013 8

SRAM

DRAM

HDD

TAPE

Memory/Storage Hierarchy

Cost per bitrises as

performanceincreasesNAND


June 5, 2013 9

NAND

SRAM

DRAM

HDD

TAPE

Flash Provides Unique Price/Performance Value

Cost per bitrises as

performanceincreasesNAND


June 5, 2013 10

Enterprise Flash Growth


Millions of Units

Source: SanDisk estimates

0

4

8

12

16

SATA PCIe SAS

Average Capacity in GB 7642672012 2013E 2014E 2015E 2016E

June 5, 2013 11

Growing Flash Adoption: Notebook PCs

Source: SanDisk estimatesIncludes Mainstream PC SSD, Cache Dual Drives and Flash-enabled Hard Drives to Notebook OEMs

3% 11% 19% 32% 45%9%

11%14%

18%20%88% 78% 67%

50%35%

0%

20%

40%

60%

80%

100%

Client SSD, Cache Dual Drives and Flash-Enabled Hard Drives Unit Shares of Notebook PCs

Cache Dual Drive or Flash in HDD Mainstream PC SSD Not flash-enabled

% of Notebook PCs

2012 2013E 2014E 2015E 2016E


June 5, 2013 12

Embedded and SSD Growth Drives Flash Opportunity



11.4 14.7

4.6

7.82.8

7.47.1

7.6

$0

$5

$10

$15

$20

$25

$30

$35

$40

2012 2016E

Embedded Client SSD Enterprise SSD Removable & Other

Rev TAM in $B

SanDisk Focus1. Strengthen portfolio of

Value-add solutions in these markets

2. Revenue share to outperform bit share

3. Drive for best combination of revenue, profits and cash flow

$26B

$38B

June 5, 2013 13

SanDisk With Pliant / ESS

Flash Memory

Software and Solutions• Caching • Optimization• Clustering

Consumer-grade products

Enterprise-grade ASIC

Enterprise-grade sub-system solutions

TraditionalSanDisk

Increasing Value

SanDisk Strategy: Continue Portfolio Shift to High-Margin Businesses


June 5, 2013 14

Portfolio Shift Emphasizes IP-Rich Products


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cards, USB &OtherEmbedded

SSD

2008 2012 2016E

June 5, 2013 15

• Most Efficient and Scalable 3D NAND Architecture• Positioning for Industry Leadership• System Solutions Being Defined

SanDisk Technology Leadership Strategy

19-NM 1Y-NM

1Y-NM 1Z-NM

1Z-NM ??

2D NAND

• 32 Gb Test Chip Successfully Made on 24nm node• Potential to Scale Below 10nm • Ultimate Scalable 3D technology

3D BiCSBit Cost Scalable NAND

3D ReRAM3D Resistive RAM


June 5, 2013 16

SanDisk Die Size Leadership Drives Cost Advantage

mm2/GB Die Area/GB Current Highest Volume Technologies

Company A Company B Company C SanDisk/Toshiba

19nm


June 5, 2013 17

1Z

Leadership Expected to Continue into 3D NAND


Competitor 3D NAND Technology SanDisk/Toshiba BiCS SanDisk/Toshiba 1Z

Gen 1

Gen 2

Gen 3Gen 1 - Pilot

Gen 2Gen 3

Breadth of Customer Applications (Cards, USB, Embedded, SSD…)

mm2/GB

* Estimates based on analysis of published 3D NAND architectures

Estimated die area*

June 5, 2013 18

Newer 2D NAND Technology Nodes Providing Lower Bit Growth


Scaling Challenges– Less bit growth from technology transition

Longer Technology Node Life Cycles– Driven by OEM / Enterprise requirements

Shallower Annual Cost Reduction Rate

Reduced Annual Bit Growth Rate

June 5, 2013 19

Increasing Manufacturing Process Complexity Leading to Lower New Capacity Additions


Capex spending levels and ROI considerations leading to lower rate of new capacity additions

2D NAND Pushing Scaling Limits– New process modules required– New materials, more tools, more steps

Industry Approaching Transition from 2D to 3D

Increasing Capex for Technology Transitions

Uncertainty about ROI on New Capacity

June 5, 2013 20

1

10

100

1,000

10,000

100,000

2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F

Industry PB - Log Scale

Industry Supply Bit Growth Moderating

2013: 30-40%

2014: 30-40%

’05-’09 Bit Growth CAGR 132%

’09-’12 Bit Growth CAGR 72%

2013E 2014E



June 5, 2013 21

SanDisk Memory Capacity Planning Current SanDisk capacity 2.5M wafers/year in Fab 3, Fab 4, Fab 5 combined

No new wafer capacity for 2013- Focus on productivity improvements- Last new wafer capacity added was in January 2012

Fab 5 Phase 1 space expected to be fully utilized 1H-2014- Primary utilization as tool space for 1Y technology transition

Fab 5 Phase 2 space construction expected to be completed in 2014

- Primary utilization as tool space for 1Z technology transition and BiCS pilot line


June 5, 2013 22Bank of America Merrill Lynch Global Technology Conference, San Francisco, CA

NAND Industry in an Extended Stable Environment

Lower Bit Growth from ScalingIncreasing Capex for Tech TransitionsROI ConsiderationsFewer Capacity Additions

Moderate Supply Growth

Favorable Pricing EnvironmentExtended Stability

Pervasive in Consumer ElectronicsRobust Mobile DemandGrowing Penetration in Personal ComputingFlash Disrupting the Enterprise

Strong Demand

June 5, 2013 23

LTFM Evolution

All percentages are non-GAAP – see appendix for non-GAAP to GAAP definitions and reconciliations.

HistoricalLTFM

AdjustedLTFM Comments

Revenue 100% 100%

Gross Margin 35% - 41% 38% - 44% Evolving product mix; disciplined capacity management

R&D 7% - 9% 9% - 11% More complex products & technology

S&M ~5% ~5%

G&A ~3% ~3%

Total Operating Expenses 15% - 17% 17% - 19%

Operating Margin 20% - 24% 21% - 25%Potential upside with further evolution of solutions mix and stabilization of operating expense investments


June 5, 2013 24

$1,312 $1,791$3,193 $3,687 $3,783 $4,265

2008 2009 2010 2011 2012 Q1 2013

$ in Millions

SanDisk Balance Sheet is a Key Competitive Asset

Net Cash = [Cash + Cash Equivalents + Short-term & Long-term Marketable Securities] LESS [Debt Value at Maturity]

Net Cash


June 5, 2013 25

Cash Priorities to Maximize Shareholder Value M&A

Flexibility to act fast Cash is optimal currency Targets:

Expanded solutions IP Talent

Return of Cash to Stockholders Target method = share repurchase Repurchase the larger of two objectives:

Offset employee stock dilution 70% of free cash flow

More than $300M spent 2013 YTD Future Capital Requirements

Potential usage for 3D technologies


June 5, 2013 26

Well-Positioned for Long Term Success

Brand, Industry Recognition Deep engagement with customers, partners1

Diverse Portfolio #1 Retail brand worldwide; Mobile, SSD, Software solutions2

Financial Strength $4B+ of net cash – flexibility to invest; return of cash to shareholders3

Vertical Integration, Scale State-of-the-art fab and manufacturing operations with large scale4

Focus5Focused on Flash Memory – Global leader in Flash Memory storage solutions


June 5, 2013 27Bank of America Merrill Lynch Global Technology Conference, San Francisco, CA

Thank You!

June 5, 2013 28

AppendicesBasis of Presentation for Non-GAAP to GAAP Reconciliations

Reconciliation of Non-GAAP to GAAP for Adjusted Long-term Financial ModelNon-GAAP to GAAP Reconciliations for Historical Results

Copyright & Trademarks


June 5, 2013 29

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles(GAAP), we use non-GAAP measures of operating results, net income and net income per share, which are adjusted from results basedon GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user'soverall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAPresults provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains andlosses that we believe are not indicative of our core operating results and because it is consistent with the financial models andestimates published by many analysts who follow the Company. For example, because the non-GAAP results exclude the expenses werecorded for share-based compensation, amortization and write-off of acquisition-related intangible assets related to acquisitions ofMatrix Semiconductor, Inc. in January 2006, msystems Ltd. in November 2006, Pliant Technology, Inc. in May 2011, FlashSoftCorporation in February 2012 and Schooner Information Technology, Inc. in June 2012, non-cash economic interest expenseassociated with the convertible debt, non-cash change in fair value of the liability component of the repurchased portion of theconvertible debt and related tax adjustments, we believe the inclusion of non-GAAP financial measures provides consistency in ourfinancial reporting. These non-GAAP results are some of the primary indicators management uses for assessing our performance,allocating resources and planning and forecasting future periods. Further, management uses non-GAAP information that excludescertain non-cash charges, such as amortization and write-off of acquisition-related intangible assets, share-based compensation, non-cash economic interest expense associated with the convertible debt, non-cash change in fair value of the liability component of therepurchased portion of the convertible debt and related tax adjustments, as these non-GAAP charges do not reflect the cash operatingresults of the business or the ongoing results. These measures should be considered in addition to results prepared in accordance withGAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different thanthe non-GAAP measures used by other companies.

Basis of Presentation for non-GAAP to GAAP Operating Results


June 5, 2013 30

Reconciliation of Non-GAAP to GAAP for Adjusted Long-term Financial Model

(1) Estimated share-based compensation expense and amortization of acquisition-related intangible assets.

Adjusted LTFM

Non-GAAP

Adjustments to Reconcile to GAAP (1) GAAP

Revenue 100% ― 100%

Total Gross Margin 38% - 44% (1%) 37% - 43%

R&D 9% - 11% 1% 10% - 12%

S&M ~5% 1% ~6%

G&A ~3% 1% ~4%

Total Operating Expenses 17% - 19% 2% 19% - 21%

Operating Margin 21% - 25% (3%) 18% - 22%


June 5, 2013 31

Reconciliation of Non-GAAP to GAAP Condensed Consolidated Statement of Operations

Three months ended July 1, 2012 (in thousands, except percentages and per share amounts, unaudited)

Purchase ConvertibleQ212 Share-based Accounting Debt Q212

Non-GAAP % of Rev Compensation Adjustment Adjustment Other GAAP % of RevProduct revenues $ 945,204 91.6% $ - $ - $ - $ - $ 945,204 91.6%License and royalty revenues 87,051 8.4% - - - - 87,051 8.4%

Total revenues 1,032,255 100.0% - - - - 1,032,255 100.0%

Cost of product revenues 740,374 78.3% (a) 1,923 - - - 742,297 78.5% (a)

Amortization of acquisition-related intangible assets - - (a) - 9,181 (b) - - 9,181 1.0% (a)Total cost of product revenues 740,374 78.3% (a) 1,923 9,181 - - 751,478 79.5% (a)

Product gross profit 204,830 21.7% (a) (1,923) (9,181) - - 193,726 20.5% (a)Gross profit 291,881 28.3% (1,923) (9,181) - - 280,777 27.2%

Research and development 141,774 13.7% 10,623 - - - 152,397 14.8%Sales and marketing 48,627 4.7% 3,634 - - - 52,261 5.1%General and administrative 33,619 3.3% 4,073 - - - 37,692 3.7%

Amortization of acquisition-related intangible assets - - - 2,244 (b) - - 2,244 0.2%Total operating expenses 224,020 21.7% 18,330 2,244 - - 244,594 23.7%

Operating income 67,861 6.6% (20,253) (11,425) - - 36,183 3.5%

Other income (expense), net 5,158 0.5% - - (22,355) (c) (17,197) -1.7%Income before taxes 73,019 7.1% (20,253) (11,425) (22,355) - 18,986 1.8%

Provision for income taxes 21,906 2.1% (4,676) (d) (239) (d) (8,137) (d) (2,837) (d) 6,017 0.6%

Net income $ 51,113 5.0% $ (15,577) $ (11,186) $ (14,218) $ 2,837 $ 12,969 1.3%

Net income per share, diluted $ 0.21 $ 0.05

Diluted shares used in computing net income per share 244,701 244,570

Effective tax rate 30.0% 23.1% 2.1% 36.4% 31.7%

(a) Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).(b) Amortization of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012) and Schooner Information

Technology, Inc. (June 2012).(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Note due 2013 and 1.5% Sr. Convertible Note due 2017.(d) Income taxes associated with certain non-GAAP to GAAP adjustments.


June 5, 2013 32


Three months ended September 30, 2012 (in thousands, except percentages and per share amounts, unaudited)


Non-GAAP % of Rev Compensation Adjustment Adjustment Other GAAP % of RevProduct revenues $ 1,182,159 92.9% $ - $ - $ - $ - $ 1,182,159 92.9%License and royalty revenues 91,031 7.1% - - - - 91,031 7.1%

Total revenues 1,273,190 100.0% - - - - 1,273,190 100.0%

Cost of product revenues 878,540 74.3% (a) 1,929 - - - 880,469 74.5%

Amortization of acquisition-related intangible assets - - (a) - 9,800 (b) - - 9,800 0.8%Total cost of product revenues 878,540 74.3% (a) 1,929 9,800 - - 890,269 75.3%

Product gross profit 303,619 25.7% (a) (1,929) (9,800) - - 291,890 24.7%Gross profit 394,650 31.0% (1,929) (9,800) - - 382,921 30.1%

Research and development 139,957 11.0% 10,379 - - - 150,336 11.8%Sales and marketing 54,144 4.3% 3,794 - - - 57,938 4.6%General and administrative 36,357 2.9% 3,848 - - - 40,205 3.2%

Amortization of acquisition-related intangible assets - - - 2,369 (b) - - 2,369 0.2%Total operating expenses 230,458 18.1% 18,021 2,369 - - 250,848 19.7%


Other income (expense), net 8,990 0.7% - - (22,685) (c) (13,695) -1.1%Income before taxes 173,182 13.6% (19,950) (12,169) (22,685) - 118,378 9.3%

Provision for income taxes 55,418 4.4% (5,464) (d) (316) (d) (8,257) (d) 490 (d) 41,871 3.3%

Net income $ 117,764 9.2% $ (14,486) $ (11,853) $ (14,428) $ (490) $ 76,507 6.0%




(a) Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).(b) Amortization of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of Pliant Technology, Inc. (May

2011), FlashSoft Corporation (February 2012) and Schooner Information Technology, Inc. (June 2012).

(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Note due 2017.(d) Income taxes associated with certain non-GAAP to GAAP adjustments.


June 5, 2013 33


Three months ended December 30, 2012 (in thousands, except percentages and per share amounts, unaudited)


Non-GAAP % of Rev Compensation Adjustment Adjustment Other GAAP % of Rev

Product revenues $ 1,444,719 93.7% $ - $ - $ - $ - $ 1,444,719 93.7%

License and royalty revenues 96,784 6.3% - - - - 96,784 6.3%

Total revenues 1,541,503 100.0% - - - - 1,541,503 100.0%

Cost of product revenues 926,591 64.1%(a) 2,070 (b) - - - 928,661 64.3%(a)

Amortization of acquisition-related intangible assets - -(a) - 9,830 (c) - - 9,830 0.7%(a)

Total cost of product revenues 926,591 64.1%(a) 2,070 9,830 - - 938,491 65.0%(a)

Product gross profit 518,128 35.9%(a) (2,070) (9,830) - - 506,228 35.0%(a)

Gross profit 614,912 39.9% (2,070) (9,830) - - 603,012 39.1%

Research and development 149,094 9.7% 9,981 (b) - - - 159,075 10.3%

Sales and marketing 61,292 4.0% 3,528 (b) - - - 64,820 4.2%

General and administrative 36,332 2.4% 3,581 (b) - - - 39,913 2.6%

Amortization and write-off of acquisition-related intangible assets - - - 3,229 (c) - - 3,229 0.2%

Total operating expenses 246,718 16.0% 17,090 3,229 - - 267,037 17.3%


Other income (expense), net 10,065 0.7% - - (23,036) (d) - (12,971) (0.8%)

Income before income taxes 378,259 24.5% (19,160) (13,059) (23,036) - 323,004 21.0%

Provision for income taxes 121,043 7.9% (2,211) (958) (8,028) (385) (e) 109,461 7.1%

Net income $ 257,216 16.7% $ (16,949) $ (12,101) $ (15,008) $ 385 $ 213,543 13.9%




(a) Percent of revenue calculations for cost of product revenues and product gross profit are based on product revenues only (license and royalty revenues are excluded).(b) Share-based compensation expense.(c) Amortization and write-off of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of

Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012) and Schooner Information Technology, Inc. (June 2012).(d) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017.(e) Income taxes associated with certain non-GAAP to GAAP adjustments.


June 5, 2013 34


Three months ended March 31, 2013 (in thousands, except percentages and per share amounts, unaudited)

Purchase ConvertibleQ1'13 Share-based Accounting Debt Q1'13

Non-GAAP % of Rev Compensation Adjustment Adjustment Other GAAP % of Rev

Revenues $ 1,340,729 100.0% $ - $ - $ - $ - $ 1,340,729 100.0%

Cost of revenues 797,666 59.5% 1,717 (a) - - - 799,383 59.6%

Amortization of acquisition-related intangible assets - - - 9,830 (b) - - 9,830 0.7%

Total cost of revenues 797,666 59.5% 1,717 9,830 - - 809,213 60.4%

Gross profit 543,063 40.5% (1,717) (9,830) - - 531,516 39.6%

Research and development 159,485 11.9% 11,640 (a) - - - 171,125 12.8%

Sales and marketing 55,256 4.1% 3,871 (a) - - - 59,127 4.4%

General and administrative 40,598 3.0% 4,506 (a) - - - 45,104 3.4%

Amortization of acquisition-related intangible assets - - - 2,369 (b) - - 2,369 0.2%

Total operating expenses 255,339 19.0% 20,017 2,369 - - 277,725 20.7%


Other income (expense), net 3,680 0.3% - - (23,577) (c) - (19,897) (1.5%)

Income before income taxes 291,404 21.7% (21,734) (12,199) (23,577) - 233,894 17.4%

Provision for income taxes 84,507 6.3% (6,916) (331) (8,488) (1,107) (d) 67,665 5.0%

Net income $ 206,897 15.4% $ (14,818) $ (11,868) $ (15,089) $ 1,107 $ 166,229 12.4%




(a) Share-based compensation expense.(b) Amortization of acquisition-related intangible assets, primarily core technology, developed technology, customer relationships and trademarks related to the acquisitions of Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012) and Schooner Information

Technology, Inc. (June 2012).(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017.(d) Income taxes associated with certain non-GAAP to GAAP adjustments.


June 5, 2013 35

Copyrights & Trademarks

1GB = 1,000,000,000 bytes. Actual user storage less.

SanDisk, CompactFlash, SanDisk Ultra, SanDisk Extreme and SanDisk Extreme Pro are trademarks of SanDisk Corporation, registered in the United States and other countries. iNAND and iNAND Extreme are trademarks of SanDisk Corporation. Lightning is a U.S. registered trademark of SanDisk Enterprise IP LLC. FlashSoft is a trademark of SanDisk Enterprise IP LLC. microSD, microSDHC, microSDXC, SD, SDHC and SDXC marks and logos are trademarks of SD-3C, LLC. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holder(s).

© 2013 SanDisk Corporation. All rights reserved.


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