Since January we’ve gotten a few more pieces to the Apple SanDisk puzzle.
Nothing definitive, but enough to warrant another post before moving on.
SanDisk Analyst Day added some info. The Kinnucan capers even more so.
2012 Analyst Day
At this year’s Analyst Day in February, SanDisk’s OEM VP Dan Inbar used the slide below, “How is SanDisk Winning?”
“Memory” flanked by an iPad on the left and an iPhone on the right with “Winning” above.
I suppose these Apple products could simply be generic graphic representations of product categories, but a far more likely explanation is that this slide is a broad hint that SanDisk is, or soon will be, selling memory into both devices.
As mentioned previously, the only teardown of an Apple product that has revealed a SanDisk chip, that I am aware of, was an iPod Nano.
My guess is that the SanDisk chips have been missed along the way by the teardown shops. SanDisk NAND and Toshiba NAND are interchangeable and Toshiba NAND has been uncovered in many Apple teardowns including last week’s iPad 3 4G teardown by ifixit.
Ipad 3 logic board partial image below: the yellow rectangle: 16 GB 24 nm MLC Flash from Toshiba.
Dan’s presentation from Analyst Day, where he used the iPad-Memory-iPhone slide above:
“And this [winning] is being done with a lot of work and a lot of effort, which again, I’d try and share with you a bit, how this is happening. So obviously, the basic ingredient for all of SanDisk product is our memory. We need good memory, strong memory, advanced technology, scaled, et cetera.
And to date, our raw memory is being used in many components today, as a raw component. This, from our point of view, is a certificate of the strength of our raw technology, our basic NAND memory.”
So, Sandisk could be selling some of it’s basic NAND memory into some iPhones and iPads. Not a particularly big deal, nor should it be.
Judging by SanDisk’s weak Q1’s results, any sales in this period to Apple were not substantial.
This was directly addressed in the Analyst Day Q&A:
“Doug Freedman, RBC Capital Markets: All right. Let me try one more then on the OEM front. One of the complaints, I think, investors have had is that there’s a question whether you’re exposed to the right end customers.
We’re looking at Apple and Samsung doing extremely well in the smartphone market. Your exposure there is clearly limited. The question really is what are you doing to broaden your customer base, broaden the platforms? You mentioned that you felt like you got caught in the Q1 being limitedly exposed even at the customers that you have, you’re working on expanding that. How do I think about going forward what that has done to your strategy?
Dan Inbar: Yeah?
Sanjay Mehrotra: Yes, absolutely.
Dan Inbar: I wasn’t sure. Right at the bell.
So yes, as we said, we have had some designs that didn’t go as strongly as we would like and others, that not necessarily we were a part of, were doing very well in the first half of this year. That said and I think if you go outside here, you can see that you can, you will see design wins at basically all these OEMs. And developing the right product, the right configuration for each of them is something that we continuously do. And we believe that we are very well-positioned for the second half, for a strong second half, including the names you mentioned and many others, of course.”
So SanDisk feels it is well positioned for a strong second half including Apple.
More raw NAND Apple sales aren’t particularly exciting in themselves. But throw in some Apple SSD sales, and it could get interesting. L&R would be welcome too.
We’ve got more evidence that the SanDisk 27 September 2011 Confidential Treatment Order was Apple, which could point to both Apple opportunities and L&R.
We can thank the FBI for this info. Apparently the FBI trumps CT Orders.
They say, the FBI always gets its man. In this case they did and it was John Kinnucan, a Portland research analyst.
They really really wanted to get him. And get him, they did.
Mr. Kinnucan publicly taunted the FBI on television and in print for two years with follow-up phone calls .
Not a good idea.
Mr. Kinnucan is now awaiting trial, in jail.
Mr. Kinnucan curried favor with Donald Barnetson, a senior director at SanDisk. In return, Mr. Barnetson fed Mr. Kinnucan SanDisk juicy confidential info.
Central to the FBI insider-trading case are leaks of a legal dispute between Apple and SanDisk. Interesting in itself, but even more so in that a resolution was soon expected that would be positive for SanDisk’s business.
From page 15 of Court Documents, 16 February 2012:
“d. Later in the same conversation on September 10, 2010, the SanDisk Insider[Barnetson] told Kinnucan about certain confidential negotiations over a legal dispute between SanDisk and Apple that were expected to be finalized within 6 weeks, and expected to be positive for SanDisk’s business. The SanDisk Insider explained that once finalized, SanDisk would have to file a Form 8-K with the U.S. Securities and Exchange Commission to disclose material corporate events to shareholders and the public.
e. Shortly after his conversation with the SanDisk Insider, Kinnucan contacted several BBR Clients and advised them against short selling SanDisk stock for the next six weeks.”
A form 8-K is a very broad form used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission.
No form 8-K has been filed by SanDisk for any deal with Apple. Not even a whisper of any negotiations has reached the media.
So what happened?
My guess is that negotiations dragged out far longer than 6 weeks, and the final resolution resulted in the CT Order filed in the fall of 2011. My guess is that the dispute revolved around flash management software. SanDisk’s strength and key to Apple’s ability to use raw NAND solutions.
As to what SanDisk would have received from Apple, my guess is license and royalty payments, and business opportunities.
In Q4 SanDisk did receive a “one-time favorable royalty adjustment of $7 million.” So that could fit.
Also James Brelsford, SanDisk’s Chief Legal Officer and VP of IP Licensing just received a $360,000 bonus for fiscal year 2011.
Make of it what you will.
The following believable rumors are worth watching.
Micron royalty talks apparently are still going on. Micron has likely avoided paying royalties because of their Intel partnership. Intel and SanDisk had/have a cross licensing agreement.
With the Intel shield now gone, the pressure might be ratcheting up on Micron.
SanDisk has guided for 2012 revenue of $6.2 billion to $6.6 billion, up from $5.66 billion in 2011. SanDisk expects that the majority of this revenue growth will take place in the second half of the year.
Rumor has it that this upside is solid because it is based on OEM design wins.
SanDisk continues to have its eye out for viable acquisition targets.
Apparently some Anobit enterprise SSD employees are interested in moving to SanDisk, including some that worked in the past at FLSH and SanDisk.
Yoram Cedar, SanDisk’s CTO recently left the company. Some have speculated that his departure might be problematic.
Apparently there were no issues. Yoram simply wanted to be involved in his son’s Internet start-up. His SanDisk option profits gave him the opportunity and he took it.
For the time being Yoram’s SanDisk responsibilities have been split between Atsuyoshi Koike and Ritu Shrivastava, two very capable individuals.