SanDisk ( 33.8175 0.00 0.00%) has a strong product portfolio and is a significant player in the U.S. flash memory market. The company posted very encouraging fourth quarter 2009 results, exceeding the management guidance.
SanDisk witnessed major gains in the OEM business and higher product revenue and has provided a decent guidance for the first quarter. The company has reduced its cost of production significantly, which in turn has improved gross margin substantially in 2009. SanDisk is cash rich and is aggressively reducing capital expenditure outlay, while reducing convertible debt. In order to reduce inventory level, the company is slowing down in-house NAND supply.
Although SanDisk is showing signs of revival, its customer concentration risk is a factor. We are optimistic about the long-term growth story of SanDisk and upgrade the stock to Outperform.
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