8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 26, 2006

SanDisk Corporation

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 000-26734
(Commission File No.) 77-0191793
(I.R.S. Employer
Identification Number

140 Caspian Court, Sunnyvale, California 94089

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 542-0500

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition
	Item 9.01 Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EXHIBIT 99.1

Item 2.02 Results of Operations and Financial Condition

     On January 26, 2006, SanDisk Corporation (the “Registrant”) issued a press release to report its financial results for its fourth quarter and fiscal year ended January 1, 2006. The press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference.

     The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall be deemed to be “furnished” and therefore shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

      (c) Exhibits

Number	Description of Document
99.1	Press Release of SanDisk Corporation dated January 26, 2006 to report its financial results for its fourth quarter and fiscal year ended January 1, 2006.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 26, 2006

SANDISK CORPORATION
By:	/s/ Judy Bruner
Name:	Judy Bruner
Title:	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number	Description of Document
99.1	Press Release of SanDisk Corporation dated January 26, 2006 to report its financial results for its fourth quarter and fiscal year ended January 1, 2006

EX-99.1

EXHIBIT 99.1

CONTACT:	Investor Contact:	Media Contact:
	Lori Barker Padon (408) 542-0585	Mike Wong (408) 548-0223

SANDISK REPORTS RECORD QUARTER ON STRONG SALES INTO HANDSETS AND FLASH MP3 PLAYERS

• Revenues $751 million, up 37%; EPS $.68, up 62%

• Operating Profit of $198 million, 26% of revenue

• Ramping 300 millimeter production and 8 Gigabit NAND/MLC chip

SUNNYVALE, CA, January 26, 2006 – SanDisk® Corporation (NASDAQ:SNDK), the world’s largest supplier of flash storage card products, today announced results for the fourth quarter ended January 1, 2006. Fourth quarter revenues increased 37% on a year-over-year basis to a record $751 million and increased 27% compared to the third quarter of 2005. Fourth quarter net income was $134 million compared to $78 million in the fourth quarter of 2004 and $107 million in the third quarter of 2005. Fully diluted earnings per share was $0.68, up 62% on a year-over-year basis and up 24% compared to the third quarter of 2005.

Total revenue for fiscal 2005 was $2.3 billion, up 30% from $1.8 billion in 2004. Product revenues were $2.1 billion, up 29% from $1.6 billion in 2004. License and royalty revenues were $239 million, up 37% from $174 million in 2004. Net income was $386 million, up 45% from net income of $267 million in 2004. Fully diluted earnings per share for fiscal 2005 was $2.00, compared to $1.44 in 2004.

“The fourth quarter was a strong finish to a great year for SanDisk. We sold approximately 11 million mobile cards primarily into OEM bundles in camera-phones and music–centric phones, and we are seeing exceptionally broad acceptance of our microSD^TM format in new handsets from the top tier OEMs. We sold more than a million Flash MP3 players in the fourth quarter, gaining a clear number two share in the highly competitive U.S. retail market, indicative of the growing recognition among consumers of the SanDisk brand, and driven by our strong retail sales organization, which surpassed the 150,000 storefront milestone during the quarter,” said Eli Harari, SanDisk CEO.

“We are optimistic about our business outlook and our competitiveness in 2006 and expect this to be a year of continuing strong growth in demand in our target markets as well as a competitive landscape that is characteristic of rapidly growing consumer mass–markets. We expect a seasonally soft first quarter in retail partially offset by continuing strength in our OEM handset business. To stimulate demand and accelerate consumers’ move to gigabyte capacities in 2006, we are taking significant pricing actions in the first quarter that are made possible for us through the significantly lower costs achieved as we ramp production at the Flash Partners’ Fab 3 and as we continue to increase output of our 8 gigabit chip.”

Financial Results

• Product revenue was a record $683 million in the fourth quarter, up 35% year-over-year and 29% sequentially.

• Revenue from license and royalties was $67 million, up 63% year-over-year and 12% sequentially.

• Megabytes sold in the fourth quarter increased 122% year-over-year and 49% from the third quarter of 2005. Total megabytes sold in 2005 was 166% higher than in 2004.

• Average density per card sold in retail was 555 megabytes, up 64% from the fourth quarter of 2004 and up 8% sequentially.

• Average price per megabyte sold declined 13% sequentially and 39% from the fourth quarter of 2004. Total average price per megabyte sold in 2005 declined 52% from 2004.

• Total gross margin was 40% of revenues compared to 37% in the fourth quarter of 2004 and 44% in the third quarter of 2005. Total gross margin in 2005 increased 3.6 points from 2004.

• Product gross margin was 34.4% compared to 32.0% in the fourth quarter of 2004 and 37.2% in the third quarter of 2005. Product gross margin in 2005 was 35.5% compared to 31.9% in 2004.

• In the fourth quarter, one quarter ahead of our previous forecast, Fab 3 300 millimeter 4 gigabit NAND/MLC 90 nanometer production achieved lower die cost than the corresponding 4 gigabit die manufactured in high volumes on our mature 200 millimeter production line.

• Operating income was a record $198 million and 26% of revenue compared to $126 million and 23% of revenue in the fourth quarter of 2004 and $159 million and 27% of revenue in the third quarter of 2005. Operating income for 2005 was $577 million and 25% of revenue, up from $419 million and 24% of revenue in 2004.

• Net income was $134 million compared to $78 million in the fourth quarter of 2004 and $107 million in the third quarter of 2005.

• Cash flow from operations for 2005 was $481 million compared to $228 million in 2004 and total cash and short-term investments increased to $1.7 billion.

Other Recent Highlights

• SanDisk completed the acquisition of Matrix® Semiconductor, Inc., a privately-held company with strong IP in 3D memory technology.

• SanDisk announced the new flagship Sansa^TM e200 MP3 player in capacities ranging from 2 gigabyte (GB) to 6GB, with a sleek design, color screen and microSD card expansion slot. The feature-rich, value-priced Sansa c100 models were also recently introduced in 1 and 2GB capacities.

• Mobile cards continued to proliferate and SanDisk announced a 1GB capacity microSD^TM card and 2GB capacity miniSD^TM card.

• SanDisk announced the addition of U3^TM smart drive functionality to its award winning line of Cruzer® USB flash drives.

• SanDisk appointed two new board members: Steven J. Gomo, current Executive Vice President, Finance and CFO at Network Appliance, Inc. and Eddy W. Hartenstein, previous Chairman and Chief Executive Officer of DirecTV, Inc.

Scheduled Interviews
SanDisk Corporation President and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC’s “Squawk Box”, January 27, 2006 at approximately 4:50 a.m. PST. Judy Bruner, SanDisk’s Executive Vice President, Administration and CFO is scheduled to appear on Bloomberg TV’s “Market Line”, January 27, 2006 at approximately 9:39 a.m. PST.

Conference Call
SanDisk’s fourth quarter 2005 conference call is scheduled for 2:00 p.m. PST, Thursday, January 26, 2006. The conference call will be web cast by CCBN and can be accessed live, and throughout the quarter, at SanDisk’s website at www.sandisk.com/IR and at www.streetevents.com for registered streetevents.com users. To participate in the call via telephone, the dial in number is (913) 981-4911. The call will also be available by telephone replay through Monday, January 30, 2006, by dialing (719) 457-0820 and entering the pass code 3142125. A copy of this press release will be filed with the Securities and Exchange Commission on a current report on Form 8-K and will be posted to our website prior to the conference call.

Forward-Looking Statements
This news release contains certain forward-looking statements, including statements about our business outlook for the first quarter and fiscal year 2006, market supply and demand, expected continued strength in the handset market and continued intense competition in our markets, and scheduled appearances by our CEO and CFO that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others: slower than expected growth in market demand for our products or a slower adoption rate for these products in current and new markets that we are targeting, any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us, decreased availability of test and assembly capacity and increased prices for such services, slower than expected expansion of our global sales channels, fluctuations in operating results, unexpected yield variances and longer than expected low yields and other possible delays related to our conversion to 70-nanometer NAND flash technology or the ramp-up of the 300-millimeter flash fabrication facility, unexpected delays in the ramp-up of volume production of our new 70-nanometer 8 gigabit NAND/MLC chip, our inability to make additional planned smaller geometry conversions in a timely manner, future average selling price erosion that may be more severe than our expectations due to decreased demand or possible excess industry capacity of flash memory from ourselves as well as from existing suppliers or from new competitors that are planning to aggressively increase supply in 2006, price increases from non-captive flash memory sources and third-party subcontractors, higher than expected operating expenses, higher than anticipated capital equipment expenditures, adverse global economic and geo-political conditions, including adverse currency exchange rates and acts of terror, the timely development, internal qualification and customer acceptance of new products that are based on 70-nanometer NAND technology, fluctuations in license and royalty revenues, business interruption due to earthquakes, hurricanes, pandemics or other natural disasters, particularly in areas in the Pacific

Rim and Japan where we manufacture and assemble products, potential impact of high energy prices and other global events outside of our control which could adversely impact consumer confidence and hence reduce demand for our products, scheduled appearances by our executives could be cancelled or delayed by us or the network, and the other risks detailed from time-to-time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10-K for the year ended January 2, 2005 and our quarterly reports on Form 10-Q. Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.

About SanDisk
SanDisk is the original inventor of flash storage cards and is the world’s largest supplier of flash data storage card products using its patented, high-density flash memory and controller technology. SanDisk is headquartered in Sunnyvale, CA and has operations worldwide, with more than half its sales outside the U.S.

www.sandisk.com

SanDisk, Cruzer and Matrix are trademarks of SanDisk Corporation, registered in the United States and other countries. SanDisk Corporation is an authorized licensee of the SD trademark. U3 is a trademark of U3, LLC.

SanDisk Corporation

Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)

	Three Months Ended					Twelve Months Ended
	January 1, 2006		January 2, 2005			January 1, 2006		January 2, 2005
Revenues:
Product	$	683,431	$	507,697		$	2,066,607	$	1,602,836
License and royalty		67,136		41,186			239,462		174,219
Total revenue		750,567		548,883			2,306,069		1,777,055
Cost of product revenues		448,503		345,130			1,333,335		1,091,350
Gross profits		302,064		203,753			972,734		685,705
Operating expenses:
Research and development		44,039		35,580			194,810		124,994
Sales and marketing		38,991		25,830			122,232		91,296
General and administrative		20,583		16,325			79,110		50,824
Total operating expenses		103,613		77,735			396,152		267,114
Operating income		198,451		126,018			576,582		418,591
Total other income (expense)		14,111		(1,676	)		36,725		4,609
Income before taxes		212,562		124,342			613,307		423,200
Provision for income taxes		78,648		46,007			226,923		156,584
Net income	$	133,914	$	78,335		$	386,384	$	266,616
Net income per share calculation:
Net income used in computing basic net income per share	$	133,914	$	78,335		$	386,384	$	266,616
Tax-effected interest and bond amortization costs related to convertible subordinated notes		—		1,757			—		5,368
Net income used in computing diluted net income per share	$	133,914	$	80,092		$	386,384	$	271,984
Shares used in computing net income per share
Basic		186,884		170,869			183,008		164,065
Diluted		197,486		188,675			193,016		188,837
Net income per share
Basic	$	0.72	$	0.46		$	2.11	$	1.63
Diluted	$	0.68	$	0.42		$	2.00	$	1.44

SanDisk Corporation
Condensed Consolidated Balance Sheets
(In thousands)

	January 1, 2006			October 2, 2005			January 2, 2005*
ASSETS	(unaudited)			(unaudited)
Current Assets:
Cash and cash equivalents	$	762,058		$	764,612		$	463,795
Short-term investments		935,639			890,938			859,175
Investment in foundries		18,338			19,410			20,398
Accounts receivable, net		329,014			211,219			194,535
Inventories		331,584			286,878			196,422
Deferred tax asset		112,953			77,250			83,150
Other current assets		103,584			37,022			62,653
Total current assets		2,593,170			2,287,329			1,880,128
Property and equipment, net		211,092			179,822			147,231
Notes receivable, FlashVision		61,927			64,442			35,413
Investment in foundries		11,013			8,611			14,377
Investment in FlashVision		161,080			166,041			178,681
Investment in FlashPartners		42,067			21,461			24,192
Deferred tax asset		24,907			16,275			1,861
Other non-current assets		57,273			35,543			38,297
Total Assets	$	3,162,529		$	2,779,524		$	2,320,180
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	231,208		$	146,317		$	82,974
Accounts payable to related parties		74,121			71,160			48,115
Accrued payroll and related expenses		55,614			46,230			41,785
Income taxes payable		3,036			17,382			39,139
Research and development liability, related party		4,200			5,000			5,549
Other current accrued liabilities		70,981			44,336			45,584
Deferred income on shipments to distributors and retailers and deferred revenue		150,283			170,634			90,307
Total current liabilities		589,443			501,059			353,453
Deferred revenue and non-current liabilities		49,295			19,662			26,577
Total Liabilities		638,738			520,721			380,030
Commitments and contingencies
Stockholders’ Equity:
Common stock		1,622,007			1,484,927			1,406,553
Retained earnings		906,624			772,710			520,240
Accumulated other comprehensive income		2,635			8,921			18,893
Deferred compensation		(7,475	)		(7,755	)		(5,536	)
Total stockholders’ equity		2,523,791			2,258,803			1,940,150
Total Liabilities and Stockholders’ Equity	$	3,162,529		$	2,779,524		$	2,320,180

*Information derived from the audited Consolidated Financial Statements.

SanDisk Corporation
Condensed Consolidated Comparative Statement of Cash Flows
(in thousands, unaudited)

	Three months ended						Twelve months ended
	January 1, 2006			January 2, 2005			January 1, 2006			January 2, 2005
Cash flows from operating activities:
Net income	$	133,914		$	78,335		$	386,384		$	266,616
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes		(1,344	)		1,744			(1,538	)		9,326
Loss (gain) investment in foundries		(272	)		11,977			8,480			12,927
Depreciation and amortization		18,868			12,452			65,774			38,862
Provision for doubtful accounts		(161	)		1,739			(272	)		4,581
FlashVision wafer cost adjustment		(6,319	)		(320	)		(2,263	)		(1,282	)
Other non-cash charges		2,830			(5,041	)		9,833			(2,429	)
Changes in operating assets and liabilities:
Accounts receivable		(117,634	)		(60,118	)		(134,207	)		(14,880	)
Inventories		(44,706	)		(15,093	)		(135,162	)		(79,526	)
Other assets		(63,885	)		(31,794	)		(31,148	)		1,645
Accounts payable		86,892			(31,510	)		148,234			(6,298	)
Accounts payable, related party		8,302			(11,474	)		24,657			(3,149	)
Other liabilities		62,386			61,402			142,083			1,237
Total adjustments		(55,043	)		(66,036	)		94,471			(38,986	)
Net cash provided by operating activities		78,871			12,299			480,855			227,630
Cash flows from investing activities:
Purchases of short term investments		(312,685	)		(224,491	)		(803,967	)		(1,147,142	)
Proceeds from sale of short term investments		267,228			111,714			722,986			810,111
Notes receivable from Matrix Semiconductor		(20,000	)		—			(20,000	)		—
Investment in Flash Partners		(21,790	)		(23,059	)		(21,790	)		(23,129	)
Acquisition of MDRM		—			(9,061	)		—			(9,061	)
Proceeds from other sales		—			6,193			—			6,333
Acquisition of capital equipment, net		(53,977	)		(17,763	)		(134,477	)		(125,842	)
Acquisition of technology licenses		(4,500	)		—			(4,500	)		—
Notes receivable from FlashVision		—			—			(34,249	)		(33,564	)
Investment in foundries		(3,500	)		(704	)		(3,500	)		(704	)
Net cash used in investing activities		(149,224	)		(157,171	)		(299,497	)		(522,998	)
Cash from financing activities:
Proceeds from employee stock programs		67,155			6,448			115,398			24,648
Net cash provided by financing activities		67,155			6,448			115,398			24,648
Effect of changes in foreign currency exchange rates on cash		644			36			1,507			36
Net increase (decrease) in cash and cash equivalents		(2,554	)		(138,388	)		298,263			(270,684	)
Cash and cash equivalents at beginning of period		764,612			602,183			463,795			734,479
Cash and cash equivalents at end of period	$	762,058		$	463,795		$	762,058		$	463,795

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