10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

R QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission file number:  000-26734

SANDISK CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	77-0191793
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
951 SanDisk Drive Milpitas, California	95035
(Address of principal executive offices)	(Zip Code)

(408) 801-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes R No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes R No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer R Accelerated filer ¨ Non accelerated filer ¨ Smaller reporting company ¨

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No R

Number of shares outstanding of the issuer’s common stock, $0.001 par value, as of March 31, 2013: 243,368,566.

SanDisk Corporation

Index

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and April 1, 2012	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2013 and April 1, 2012	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and April 1, 2012	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	47
Item 4.	Controls and Procedures	48
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	68
	Signatures	S - 1
	Exhibit Index	E - 1

PART I. FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

SANDISK CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2013			December 30, 2012
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	1,148,110		$	995,470
Short-term marketable securities	2,162,073			1,880,034
Accounts receivable, net	439,496			626,025
Inventory	733,937			750,075
Deferred taxes	94,488			93,877
Other current assets	272,757			260,879
Total current assets	4,850,861			4,606,360
Long-term marketable securities	2,882,710			2,835,931
Property and equipment, net	659,222			665,542
Notes receivable and investments in Flash Ventures	1,286,073			1,460,112
Deferred taxes	118,481			168,718
Goodwill	202,336			201,735
Intangible assets, net	228,588			246,919
Other non-current assets	148,168			153,810
Total assets	$	10,376,439		$	10,339,127
LIABILITIES
Current liabilities:
Accounts payable trade	$	257,357		$	254,459
Accounts payable to related parties	176,905			214,806
Convertible short-term debt	921,007			906,708
Other current accrued liabilities	296,177			257,539
Deferred income on shipments to distributors and retailers and deferred revenue	221,644			248,155
Total current liabilities	1,873,090			1,881,667
Convertible long-term debt	799,628			789,913
Non-current liabilities	383,957			407,947
Total liabilities	3,056,675			3,079,527
Commitments and contingencies (see Note 11)
EQUITY
Stockholders’ equity:
Preferred stock	—			—
Common stock	243			241
Capital in excess of par value	5,104,549			5,027,271
Retained earnings	2,175,088			2,071,268
Accumulated other comprehensive income	42,552			165,121
Total stockholders’ equity	7,322,432			7,263,901
Non-controlling interests	(2,668		)	(4,301		)
Total equity	7,319,764			7,259,600
Total liabilities and equity	$	10,376,439		$	10,339,127

The accompanying notes are an integral part of these condensed consolidatedfinancial statements.

1

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended
	March 31, 2013			April 1, 2012
	(In thousands, except per share amounts)
Revenues	$1,340,729			$1,205,561
Cost of revenues	799,383			775,320
Amortization of acquisition-related intangible assets	9,830			13,731
Total cost of revenues	809,213			789,051
Gross profit	531,516			416,510
Operating expenses:
Research and development	171,125			140,957
Sales and marketing	59,127			49,035
General and administrative	45,104			32,591
Amortization and write-off of acquisition-related intangible assets	2,369			2,063
Total operating expenses	277,725			224,646
Operating income	253,791			191,864
Interest income	12,905			14,989
Interest (expense) and other income (expense), net	(32,802		)	(40,305		)
Total other income (expense), net	(19,897		)	(25,316		)
Income before income taxes	233,894			166,548
Provision for income taxes	67,665			52,163
Net income	$	166,229		$	114,385
Net income per share:
Basic	$	0.69		$	0.47
Diluted	$	0.68		$	0.46
Shares used in computing net income per share:
Basic	242,519			242,883
Diluted	245,577			247,102

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three months ended
	March 31, 2013			April 1, 2012
	(In thousands)
Net income	$	166,229		$	114,385
Other comprehensive income (loss), before tax:
Unrealized holding gain on marketable securities	6,227			8,734
Reclassification adjustment for realized (gain) loss on marketable securities included in net income	314			(523		)
Net unrealized holding gain on marketable securities	6,541			8,211
Foreign currency translation adjustments	(116,179		)	(102,981		)
Unrealized holding loss on derivatives qualifying as cash flow hedges	(30,630		)	(69,061		)
Reclassification adjustment for realized (gain) loss on derivatives qualifying as cash flow hedges included in net income	1,441			(6,314		)
Net unrealized holding loss on derivatives qualifying as cash flow hedges	(29,189		)	(75,375		)
Total other comprehensive loss, before tax	(138,827		)	(170,145		)
Income tax benefit related to items of other comprehensive loss	(16,258		)	(11,202		)
Total other comprehensive loss, net of tax	(122,569		)	(158,943		)
Comprehensive income (loss)	$43,660			$(44,558)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

SANDISK CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended
	March 31, 2013			April 1, 2012
	(In thousands)
Cash flows from operating activities:
Net income	$	166,229		$	114,385
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	53,151			5,503
Depreciation	53,017			33,178
Amortization	65,151			67,156
Provision for doubtful accounts	(197		)	(1,285		)
Share-based compensation expense	21,734			19,080
Excess tax benefit from share-based plans	(8,450		)	(8,597		)
Impairment and other	(3,173		)	(5,454		)
Other non-operating	136			7,652
Changes in operating assets and liabilities:
Accounts receivable, net	186,726			199,437
Inventory	16,776			(85,212		)
Other assets	(20,156		)	26,743
Accounts payable trade	2,898			(34,293		)
Accounts payable to related parties	(37,901		)	(75,203		)
Other liabilities	(22,290		)	(195,916		)
Total adjustments	307,422			(47,211		)
Net cash provided by operating activities	473,651			67,174
Cash flows from investing activities:
Purchases of short and long-term marketable securities	(1,150,347		)	(756,357		)
Proceeds from sales of short and long-term marketable securities	513,354			625,736
Proceeds from maturities of short and long-term marketable securities	293,205			192,842
Acquisition of property and equipment, net	(48,352		)	(144,218		)
Investment in Flash Ventures	—			(12,526		)
Notes receivable issuances to Flash Ventures	—			(51,130		)
Notes receivable proceeds from Flash Ventures	53,586			63,833
Purchased technology and other assets	(237		)	(28		)
Acquisitions, net of cash acquired	(142		)	(54,538		)
Net cash used in investing activities	(338,933		)	(136,386		)
Cash flows from financing activities:
Proceeds from employee stock programs	93,075			45,318
Distribution to non-controlling interests	(87		)	—
Excess tax benefit from share-based plans	8,450			8,597
Share repurchase program	(89,621		)	(60,911		)
Net cash received for share repurchase contracts	—			1,142
Net cash provided by (used in) financing activities	11,817			(5,854		)
Effect of changes in foreign currency exchange rates on cash	6,105			833
Net increase (decrease) in cash and cash equivalents	152,640			(74,233		)
Cash and cash equivalents at beginning of period	995,470			1,167,496
Cash and cash equivalents at end of period	$	1,148,110		$	1,093,263

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

SANDISK CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Summary of Significant Accounting Policies

Organization

These interim Condensed Consolidated Financial Statements are unaudited but reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of SanDisk Corporation and its subsidiaries (the “Company”) as of March 31, 2013, the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Statements of Cash Flows for the three months endedMarch 31, 2013 and April 1, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10‑K filed with the SEC on February 19, 2013. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The first quarters of fiscal years 2013 and 2012 ended on March 31, 2013 and April 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 94.11, 85.99 and 82.25 at March 31, 2013, December 30, 2012 and April 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Cash Flows and in Note 4, “Balance Sheet Information.” Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using our flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Investments and Fair Value Measurements

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	March 31, 2013		December 30, 2012
Cash and cash equivalents	$	1,148,110	$	995,470
Short-term marketable securities	2,162,073		1,880,034
Long-term marketable securities	2,882,710		2,835,931
Total cash, cash equivalents and marketable securities	$	6,192,893	$	5,711,435

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	795,213	$	—	$	—	$	795,213	$	582,743	$	—	$	—	$	582,743
Fixed income securities	65,740		5,119,437		—		5,185,177		27,386		4,917,939		—		4,945,325
Derivative assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	815,213	$	120,394	$	—	$	935,607	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	43,435		2,118,638		—		2,162,073		16,589		1,863,445		—		1,880,034
Long-term marketable securities	2,305		2,880,405		—		2,882,710		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $212.5 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012, respectively.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the three months endedMarch 31, 2013, the Company had no transfers of financial assets or liabilities between Level 1 and Level 2. As of March 31, 2013 and December 30, 2012, the Company had no financial assets or liabilities categorized as Level 3 and had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

Available-for-Sale Investments. Available-for-sale investments were as follows (in thousands):

	March 31, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Fixed income securities:
U.S. Treasury securities	$	65,727	$	13	$	—		$	65,740	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	23,525		36		(1		)	23,560		28,339		41		(1		)	28,379
International government securities	17,093		1		(15		)	17,079		153,936		13		(3		)	153,946
Corporate notes and bonds	847,920		3,434		(69		)	851,285		864,170		3,890		(938		)	867,122
Asset-backed securities	184,368		225		(43		)	184,550		179,356		453		—			179,809
Mortgage-backed securities	1,703		—		(22		)	1,681		1,872		8		(14		)	1,866
Municipal notes and bonds	4,013,057		28,499		(274		)	4,041,282		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	5,153,393	$	32,208	$	(424	)	$	5,185,177	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

The fair value and gross unrealized losses on the available-for-sale securities that have been in an unrealized loss position, aggregated by type of investment instrument, and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2013, are summarized in the following table (in thousands). Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Less than 12 months					Greater than 12 months
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	4,199	$	—		$	—	$	—
U.S. government-sponsored agency securities	6,156		(1		)	—		—
International government securities	9,868		(15		)	—		—
Corporate notes and bonds	77,132		(68		)	5,000		(1		)
Asset-backed securities	45,241		(43		)	—		—
Mortgage-backed securities	1,681		(22		)	—		—
Municipal notes and bonds	133,533		(274		)	—		—
Total	$	277,810	$	(423	)	$	5,000	$	(1	)

The gross unrealized loss related to U.S. Treasury and government-sponsored agency securities, international government securities, corporate and municipal notes and bonds, and asset-backed and mortgage-backed securities was primarily due to changes in interest rates. The gross unrealized loss on all available-for-sale fixed income securities at March 31, 2013 was considered temporary in nature. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold an investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt security investments, the Company considered additional factors including the Company’s intent to sell the investments or whether it is “more likely than not” the Company will be required to sell the investments before the recovery of its amortized cost.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended
	March 31, 2013			April 1, 2012
Gross realized gains	$	718		$	1,075
Gross realized losses	(1,032		)	(552		)

Fixed income securities by contractual maturity as of March 31, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,307,668	$	1,311,454
After one year through five years	3,022,182		3,050,188
After five years through ten years	151,806		151,812
After ten years	671,737		671,723
Total	$	5,153,393	$	5,185,177

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both March 31, 2013 and December 30, 2012.

	March 31, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	921,007	$	927,319	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	799,628		1,286,500		789,913		1,159,370
Total	$	1,720,635	$	2,213,819	$	1,696,621	$	2,087,190

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Derivatives and Hedging Activities

The Company uses derivative instruments primarily to manage exposures to foreign currency. The Company’s primary objective in holding derivative instruments is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designated for trading or speculative purposes. The Company’s derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored by the Company on an ongoing basis.

The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value and provides qualitative disclosures about objectives and strategies for using derivative instruments, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as cost of revenues or other income (expense), or as accumulated other comprehensive income (“AOCI”). The Company does not offset or net the fair value amounts of derivative instruments and separately discloses the fair value amounts of the derivative instruments as either assets or liabilities.

Cash Flow Hedges. The Company uses forward contracts designated as cash flow hedges to hedge a portion of future forecasted purchases in Japanese yen. The gain or loss on the effective portion of a cash flow hedge is initially reported as a component of AOCI and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized, or reclassified into other income (expense) if the hedged transaction becomes probable of not occurring. Any gain or loss after a hedge is no longer designated, because it is no longer probable of occurring or it is related to an ineffective portion of a cash flow hedge, as well as any amount excluded from the Company’s hedge effectiveness, is recognized as other income (expense) immediately. As of March 31, 2013, the Company had forward contracts in place to hedge future purchases of approximately 12.3 billion Japanese yen, or approximately $131 million based upon the exchange rate as of March 31, 2013, and the net unrealized loss on the effective portion of these cash flow hedges was ($12.9) million. The forward contracts on the Company’s future Japanese yen wafer purchases will substantially settle in the second quarter of fiscal year 2013 with no contracts settling beyond twelve months.

Other Derivatives. Other derivatives that are non-designated consist primarily of forward and cross currency swap contracts to minimize the risk associated with the foreign exchange effects of revaluing monetary assets and liabilities. Monetary assets and liabilities denominated in foreign currencies and the associated outstanding forward and cross currency swap contracts were marked-to-market at March 31, 2013 with realized and unrealized gains and losses included in other income (expense). As of March 31, 2013, the Company had foreign currency forward contracts hedging exposures in European euros, British pounds and Japanese yen. Foreign currency forward contracts were outstanding to buy and sell U.S. dollar equivalents of approximately $196.1 million and $101.7 million in foreign currencies, respectively, based upon the exchange rates at March 31, 2013.

The Company currently has a cross currency swap contract to exchange Japanese yen for U.S. dollars that requires the Company to comply with certain covenants, the strictest of which is to maintain a minimum liquidity of $1.0 billion. Liquidity is defined as the sum of the Company’s cash and cash equivalents and short and long-term marketable securities. This cross currency swap contract was outstanding to sell U.S. dollar equivalents of approximately $30.8 million based upon the exchange rate at March 31, 2013. Should the Company fail to comply with these covenants, the Company may be required to settle the unrealized gain or loss on the foreign exchange contract prior to the original maturity date. The Company was in compliance with these covenants as of March 31, 2013.

9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts. Fair value of derivative contracts as of March 31, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	260	$	—	$	—	$	—
Foreign exchange contracts not designated	14,677		19,064		—		994
Total derivatives	$	14,937	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	13,167	$	7,058	$	—	$	—
Foreign exchange contracts not designated	21,654		6,526		—		—
Total derivatives	$	34,821	$	13,584	$	—	$	—

Foreign Exchange and Equity Market Risk Contracts Designated as Cash Flow Hedges. The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three months endedMarch 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	Amount of loss recognized in AOCI						Amount of gain (loss) reclassified from AOCI to earnings
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(30,630	)	$	(69,061	)	$	(1,441	)	$	6,314

Foreign exchange contracts designated as cash flow hedges relate primarily to wafer purchases in Japanese yen. Gains and losses associated with foreign exchange contracts designated as cash flow hedges are expected to be recorded in cost of revenues when reclassified out of AOCI. The Company expects to realize the majority of the AOCI balance related to foreign exchange contracts within the next twelve months.

10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(307	)	$	(4,447	)

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations. The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Gain on foreign exchange contracts including forward point income	$	9,659		$	4,962
Loss from revaluation of foreign currency exposures hedged by foreign exchange contracts	(11,383		)	(4,211		)

11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Balance Sheet Information

Accounts Receivable, net. Accounts receivable, net, was as follows (in thousands):

	March 31, 2013			December 30, 2012
Accounts receivable from product revenues	$	584,698		$	766,583
Accounts receivable from license and royalty revenues	—			37,638
Allowance for doubtful accounts	(6,377		)	(6,627		)
Price protection, promotions and other activities	(138,825		)	(171,569		)
Total accounts receivable, net	$	439,496		$	626,025

Inventory. Inventory was as follows (in thousands):

	March 31, 2013		December 30, 2012
Raw material	$	389,004	$	404,634
Work-in-process	126,874		102,249
Finished goods	218,059		243,192
Total inventory	$	733,937	$	750,075

Other Current Assets. Other current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Tax-related receivables	$	177,942	$	186,223
Other non-trade receivable	35,130		—
Prepayment to Flash Forward Ltd.	20,577		20,577
Derivative contract receivables	14,937		19,064
Prepaid expenses	11,835		13,221
Other current assets	12,336		21,794
Total other current assets	$	272,757	$	260,879

Notes Receivable and Investments in Flash Ventures. Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	March 31, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	164,701	$	180,254
Notes receivable, Flash Alliance Ltd.	382,531		476,800
Notes receivable, Flash Forward Ltd.	148,762		162,810
Investment in Flash Partners Ltd.	213,027		232,547
Investment in Flash Alliance Ltd.	315,453		342,048
Investment in Flash Forward Ltd.	61,599		65,653
Total notes receivable and investments in Flash Ventures	$	1,286,073	$	1,460,112

Equity-method investments and the Company’s maximum loss exposure related to Flash Ventures are discussed further in Note 11, “Commitments, Contingencies and Guarantees – Flash Ventures” and Note 12, “Related Parties and Strategic Investments.”

The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the borrower, where material or known. Impairments, when required for credit worthiness, are recorded in other income (expense). The Company makes or will make

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

long-term loans to Flash Ventures to fund new process technologies and additional wafer capacities. The Company aggregates its Flash Ventures notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity. For all reporting periods presented, no loans were past due and no loan impairments were recorded.

Other Non-Current Assets. Other non-current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	41,025	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	8,237		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	35,898		34,832
Total other non-current assets	$	148,168	$	153,810

Other Current Accrued Liabilities. Other current accrued liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Accrued payroll and related expenses	$	97,458	$	102,269
Derivative contract payables	34,821		13,584
Taxes payable	27,565		25,476
Other accrued liabilities	136,333		116,210
Total other current accrued liabilities	$	296,177	$	257,539

Non-current liabilities. Non-current liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Deferred tax liabilities	$	16,753	$	28,672
Income tax liabilities	204,533		208,629
Deferred credits on intercompany transactions	54,348		58,548
Other non-current liabilities	108,323		112,098
Total non-current liabilities	$	383,957	$	407,947

Warranties. The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Balance, beginning of period	$	38,787		$	26,957
Additions and adjustments to cost of revenues	4,878			10,406
Usage	(4,693		)	(5,244		)
Balance, end of period	$	38,972		$	32,119

The majority of the Company’s products have a warranty of less than three years, with a small number of products having a warranty ranging up to ten years or more. For 100-year or lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure. A provision for the estimated future cost related to warranty expense is recorded at the time of customer invoice. The Company’s warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair or replacement costs, differ from the Company’s estimates, increases or decreases to its warranty liability would be required.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated Other Comprehensive Income. AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	March 31, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	20,407		$	15,919
Foreign currency translation	57,521			155,389
Hedging activities	(35,376		)	(6,187		)
Total accumulated other comprehensive income	$	42,552		$	165,121

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Available-for-sale investments	$	2,053		$	2,993
Foreign currency translation	(18,311		)	(14,195		)
	$	(16,258	)	$	(11,202	)

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended
AOCI Component	March 31, 2013			April 1, 2012			Income Statement Line Item
Unrealized gain (loss) on available-for-sale investments	$	(314	)	$	523		Interest (expense) and other income (expense), net
	(175		)	(169		)	Tax expense
	(489		)	354			Net of tax
Gain (loss) on hedging activities:
Foreign exchange contracts	(1,441		)	6,314			Cost of revenues
	—			—			Tax expense
	(1,441		)	6,314			Net of tax
Total reclassifications for the period	$	(1,930	)	$	6,668		Net of tax

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Goodwill and Intangible Assets

Goodwill. Goodwill balances as of March 31, 2013 and December 30, 2012 are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of March 31, 2013	$	202,336

Goodwill increased by $0.6 million due to the resolution of a legal contingency matter during the first quarter of fiscal year 2013 related to an acquisition from fiscal year 2012.

Intangible Assets. Intangible asset balances are presented below (in thousands):

	March 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(77,934	)	$	123,026
Customer relationships	13,050		(11,710		)	1,340
Trademarks	5,700		(2,184		)	3,516
Covenants not to compete	3,100		(2,005		)	1,095
Acquisition-related intangible assets	222,810		(93,833		)	128,977
Technology licenses and patents	133,909		(71,823		)	62,086
Total intangible assets subject to amortization	356,719		(165,656		)	191,063
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(165,656	)	$	228,588

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may not be recoverable. In the first quarter of fiscal year 2013, due to an increase in overall cost estimates and development timelines related to an in-process project for a prior acquisition, the Company performed impairment tests on the amortizable intangible assets and indefinite-lived intangible assets for this acquisition. The Company tested the recoverability of the amortizable intangible assets and performed a qualitative impairment assessment on the indefinite-lived intangible assets. As a result, the Company determined there was no impairment for either. The Company will continue to monitor any events or circumstances that could indicate its intangible assets are impaired.

15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The annual expected amortization expense of intangible assets as of March 31, 2013, excluding acquired in-process research and development, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining nine months)	$	32,729	$	17,467
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,332
Total intangible assets subject to amortization	$	128,977	$	62,086

16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6. Financing Arrangements

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	March 31, 2013			December 30, 2012
1% Notes due 2013	$	928,061		$	928,061
Less: Unamortized bond discount	(7,054		)	(21,353		)
Net carrying amount of 1% Notes due 2013	921,007			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(200,372		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	799,628			789,913
Total convertible debt	1,720,635			1,696,621
Less: Convertible short-term debt	(921,007		)	(906,708		)
Convertible long-term debt	$	799,628		$	789,913

1% Convertible Senior Notes Due 2013. In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Convertible Senior Notes due May 15, 2013 (the “1% Notes due 2013”) at par and has subsequently repurchased $221.9 million of principal amount of these notes. The 1% Notes due 2013 may be converted, under certain circumstances, based on an initial conversion rate of 12.1426 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $82.36 per share). The net proceeds to the Company from the offering of the 1% Notes due 2013 were $1.13 billion. As of March 31, 2013, the Company had $928.1 million outstanding in aggregate principal amount at par.

The Company separately accounts for the liability and equity components of the 1% Notes due 2013. The principal amount of the liability component of $753.5 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 7.4%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $394.3 million as of March 31, 2013 and December 30, 2012.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	2,319	$	2,319
Amortization of bond issuance costs	696		696
Amortization of bond discount	14,058		13,025
Total interest cost recognized	$	17,073	$	16,040

The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for each of the three months endedMarch 31, 2013 and April 1, 2012. The remaining bond discount of $7.1 million as of March 31, 2013 will be amortized over the remaining life of the 1% Notes due 2013, which is approximately 0.1 years.

Concurrent with the issuance of the 1% Notes due 2013, the Company sold warrants to acquire up to approximately 14.0 million shares of its common stock at an exercise price of $95.03 per share. Due to the repurchase of a portion of the outstanding 1% Notes due 2013 in fiscal year 2011, the Company unwound a pro-rata portion of the warrants. The counterparties may now purchase up to approximately 11.3 million shares of the Company’s common stock at an exercise price of $95.03 per share. As of March 31, 2013, the warrants had an expected life of approximately 0.4 years and will expire on 20 different dates from August 23, 2013 through September 20, 2013. At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of March 31, 2013, the remaining warrants had not been exercised and remain

17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outstanding. In addition, at issuance, counterparties agreed to sell to the Company up to approximately 14.0 million shares of its common stock, which is the number of shares initially issuable upon conversion of the 1% Notes due 2013 in full, at a conversion price of $82.36 per share. Due to the repurchase of a portion of the outstanding 1% Notes due 2013 in fiscal year 2011, the Company unwound a pro-rata portion of the convertible bond hedge. The Company may now purchase up to approximately 11.3 million shares of its common stock at a conversion price of $82.36 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1% Notes due 2013 or the first day that none of the 1% Notes due 2013 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by it upon conversion of the 1% Notes due 2013. As of March 31, 2013, the Company had not purchased any shares under the remaining convertible bond hedge agreement.

1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (the “1.5% Notes due 2017”) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below, based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from the sale of the 1.5% Notes due 2017 were $981.0 million.

The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $294.0 million as of March 31, 2013, unchanged from the date of issuance.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	3,750	$	3,750
Amortization of bond issuance costs	667		667
Amortization of bond discount	9,519		8,861
Total interest cost recognized	$	13,936	$	13,278

The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each of the three months endedMarch 31, 2013 and April 1, 2012. The remaining unamortized bond discount of $200.4 million as of March 31, 2013 will be amortized over the remaining life of the 1.5% Notes due 2017, which is approximately 4.4 years.

Concurrent with the issuance of the 1.5% Notes due 2017, the Company sold warrants to acquire up to approximately 19.1 million shares of its common stock at an exercise price of $73.33 per share. As of March 31, 2013, the warrants had an expected life of approximately 4.7 years and will expire on 40 different dates from November 13, 2017 through January 10, 2018. At each expiration date, the Company may, at its option, elect to settle the warrants on a net share basis. As of March 31, 2013, the warrants had not been exercised and remain outstanding. In addition, counterparties agreed to sell to the Company up to approximately 19.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 1.5% Notes due 2017. As of March 31, 2013, the Company had not purchased any shares under this convertible bond hedge agreement.

18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Share Repurchase Program

The Company’s Board of Directors has authorized up to $1.25 billion for share repurchases, of which$926.4 million remained available for share repurchases as of March 31, 2013. Under this program, shares repurchased are recorded as a reduction to capital in excess of par value and retained earnings in the Company’s Condensed Consolidated Balance Sheet. From inception of this share repurchase program through March 31, 2013, the Company had repurchased 7.49 million shares for $323.6 million, of which 1.76 million shares for an aggregate purchase price of $89.6 million were repurchased during the three months endedMarch 31, 2013. As part of its share repurchase program, the Company may from time-to-time enter into structured share repurchase arrangements with financial institutions. These arrangements generally require the Company to make an upfront cash payment in exchange for the right to receive shares of its common stock or cash at the expiration of the agreement, dependent upon the volume-weighted average price of the Company’s common stock at the expiration date. The initial cash principal payment, as well as the subsequent repayment of principal and return on principal, if settled in cash, are recorded as a component of capital in excess of par value in the Company’s Condensed Consolidated Balance Sheets.

19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Share-based Compensation

Share-based Plans. The Company has a share-based compensation program that provides its Board of Directors with broad discretion in creating equity incentives for employees, officers, non-employee board members and non-employee service providers. This program includes incentive and non-statutory stock option awards, stock appreciation right awards, restricted stock awards, performance-based cash bonus awards for Section 16 executive officers and an automatic grant program for non-employee board members pursuant to which such individuals will receive option grants or other stock awards at designated intervals over their period of board service. These awards are granted under various programs, all of which are stockholder approved. Stock option awards generally vest as follows: 25% of the shares vest on the first anniversary of the vesting commencement date and the remaining 75% vest proportionately each quarter over the next 12 quarters of continued service. Restricted stock unit awards generally vest in equal annual installments over a 4-year period. Initial grants to non-employee board members under the automatic grant program vest in equal annual installments over a 4-year period and subsequent grants to non-employee board members generally vest over a 1-year period in accordance with the specific vesting provisions set forth in that program. Additionally, the Company has an Employee Stock Purchase Plan (“ESPP”) that allows employees to purchase shares of common stock at 85% of the fair market value at the subscription date or the date of purchase, whichever is lower.

Valuation Assumptions

Option Plan Shares. The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.38	0.43
Risk-free interest rate	0.67%	0.62%
Expected term	4.4 years	4.3 years
Estimated annual forfeiture rate	8.59%	8.57%
Weighted average fair value at grant date	$16.46	$17.09

Employee Stock Purchase Plan Shares. The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.33	0.38
Risk-free interest rate	0.13%	0.15%
Expected term	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24

20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation Plan Activities

Stock Options and SARs. A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of March 31, 2013 and changes during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	910		51.38
Exercised	(2,942	)	32.29			55,870
Forfeited	(113	)	42.77
Expired	(2,169	)	60.94
Options and SARs outstanding at March 31, 2013	11,112		39.87		4.0	168,991
Options and SARs vested and expected to vest after March 31, 2013, net of forfeitures	10,589		39.51		3.9	164,943
Options and SARs exercisable at March 31, 2013	6,435		35.84		2.9	124,402

At March 31, 2013, the total compensation cost related to stock options granted to employees under the Company’s share-based compensation plans but not yet recognized was approximately $70.9 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.6 years. As of March 31, 2013, the Company had fully expensed all of its SARs awards.

Restricted Stock Units. Restricted stock units (“RSUs”) are settled in shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. The cost of these awards is determined using the fair value of the Company’s common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite vesting period.

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	1,839		51.50
Vested	(697	)	42.83		35,026
Forfeited	(68	)	43.81
Non-vested share units at March 31, 2013	4,151		47.18		195,851

As of March 31, 2013, the Company had approximately $151.9 million of unrecognized compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized over a weighted average estimated remaining life of 3.1 years.

Employee Stock Purchase Plan. At March 31, 2013, there was approximately $2.8 million of total unrecognized compensation cost related to the Company’s ESPP that is expected to be recognized over a period of approximately 0.4 years.

21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Share-based Compensation Expense. The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	1,717		$	1,537
Research and development	11,640			10,027
Sales and marketing	3,871			3,629
General and administrative	4,506			3,887
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911
Share-based compensation expense by type of award:
Stock options and SARs	$	8,269		$	9,216
RSUs	11,970			7,894
ESPP	1,495			1,970
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911

Share-based compensation expense of $2.4 million and $1.8 million related to manufacturing personnel was capitalized into inventory as of March 31, 2013 and December 30, 2012, respectively.

The total grant date fair value of options and RSUs vested during the three months ended March 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Fair value of options vested	$	14,568	$	14,760
Fair value of RSUs vested	29,821		19,301
Total fair value of options and RSUs vested	$	44,389	$	34,061

22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Provision for Income Taxes

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended
	March 31, 2013			April 1, 2012
Provision for income taxes	$	67,665		$	52,163
Effective tax rate	28.9		%	31.3		%

The provision for income taxes for the three months endedMarch 31, 2013 differs from the U.S. statutory tax rate primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development (“R&D”) credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to the Company’s Irish, Chinese, Israeli and Japanese entities. The lower effective tax rate for the three months endedMarch 31, 2013 compared to the same period in fiscal year 2012 is attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit in fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of March 31, 2013, the Company believes that most of its deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $176.2 million and $179.5 million as of March 31, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $83.2 million at March 31, 2013. Income tax expense for the first quarter of fiscal years 2013 and 2012 included interest and penalties of $0.7 million and $0.8 million, respectively.

The Company is subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service (“IRS”) completed its field audit of the Company’s federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report.  The most significant proposed adjustments are comprised of related party transactions between SanDisk Corporation and its foreign subsidiaries.  The Company is contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached.

The Company strongly believes the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that the Company’s previously reported income tax provisions for the years in question are appropriate.  The Company believes that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner that is not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of the Company’s federal income tax returns for fiscal years 2009 through 2011. The Company does not expect a resolution of this audit to be reached during the next twelve months. In addition, the Company is currently under audit by various state and international tax authorities. The Company cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm the Company’s financial position, results of operations or liquidity.

23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended
	March 31, 2013		April 1, 2012
Numerator for basic net income per share:
Net income	$	166,229	$	114,385
Denominator for basic net income per share:
Weighted average common shares outstanding	242,519		242,883
Basic net income per share	$	0.69	$	0.47
Numerator for diluted net income per share:
Net income	$	166,229	$	114,385
Denominator for diluted net income per share:
Weighted average common shares outstanding	242,519		242,883
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	3,058		4,219
Shares used in computing diluted net income per share	245,577		247,102
Diluted net income per share	$	0.68	$	0.46
Anti-dilutive shares excluded from net income per share calculation	68,296		68,352

Basic earnings per share exclude any dilutive effects of stock options, SARs, RSUs, warrants and convertible debt. Diluted earnings per share include the dilutive effects of stock options, SARs, RSUs and ESPP. Certain common stock issuable under stock options, SARs, warrants, the 1% Notes due 2013 and the 1.5% Notes due 2017 have been omitted from the diluted net income per share calculation because their inclusion is considered anti-dilutive.

24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Commitments, Contingencies and Guarantees

Flash Ventures

Flash Ventures, the Company’s business ventures with Toshiba Corporation (“Toshiba”), consists of three separate legal entities: Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. The Company has a 49.9%ownership interest in each of these entities and Toshiba owns 50.1% of each of these entities. Through these ventures, the Company and Toshiba have collaborated in the development and manufacture of NAND flash memory products which are manufactured by Toshiba at its wafer fabrication facility located in Yokkaichi, Japan, using semiconductor manufacturing equipment owned or leased by Flash Ventures. Flash Ventures purchases wafers from Toshiba at cost and then resells those wafers to the Company and Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in each Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers. In addition, the Company is committed to fund 49.9% of Flash Ventures’ costs to the extent that Flash Ventures’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.

Flash Partners. Flash Partners Ltd. (“Flash Partners”) was formed in fiscal year 2004. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 3”) located in Yokkaichi, Japan. As of March 31, 2013, the Company had notes receivable from Flash Partners of $164.7 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The Company also has guarantee obligations to Flash Partners; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the Company had an equity investment in Flash Partners of $213.0 million and $232.5 million, respectively, denominated in Japanese yen, offset by $39.3 million and $59.3 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three months endedMarch 31, 2013 and April 1, 2012, the Company recorded a basis adjustment of $0.3 million and $1.3 million, respectively, to its equity in earnings from Flash Partners related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Partners.

Flash Alliance. Flash Alliance Ltd. (“Flash Alliance”) was formed in fiscal year 2006. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 4”) located in Yokkaichi, Japan. As of March 31, 2013, the Company had notes receivable from Flash Alliance of $382.5 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The Company also has guarantee obligations to Flash Alliance; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the Company had an equity investment in Flash Alliance of $315.5 million and $342.0 million, respectively, denominated in Japanese yen, offset by $24.1 million and $53.7 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three months endedMarch 31, 2013 and April 1, 2012, the Company recorded a basis adjustment of $2.9 million and $4.0 million, respectively, to its equity earnings from Flash Alliance related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Alliance.

Flash Forward. Flash Forward Ltd. (“Flash Forward”) was formed in fiscal year 2010. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 5”) located in Yokkaichi, Japan. Fab 5 is to be built in two phases. As of March 31, 2013, the Phase 1 build-out had been completed and was equipped to a portion of the potential equipment capacity. The Company had invested in 50% of that equipment. No commitment has yet been made for further Phase 1 capacity expansion beyond productivity improvements; however, the Company periodically reviews the timeline of further Phase 1 capacity expansion. Furthermore, no timelines have been finalized for the construction of Phase 2. If and when Phase 2 is built, the Company is committed to 50% of the initial ramp in Phase 2, similar to that in Phase 1. On completion of Phase 2, Fab 5 is expected to be of similar size to Toshiba’s Fab 4. The Company and Toshiba will each retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate level of equipment funding.

As of March 31, 2013, the Company had notes receivable from Flash Forward of $148.8 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward with the note proceeds. The Company also has guarantee obligations to Flash Forward; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the

25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company had an equity investment in Flash Forward of $61.6 million and $65.7 million, respectively, denominated in Japanese yen, offset by ($9.4) million and ($3.7) million, respectively, of cumulative translation adjustments recorded in AOCI.

Toshiba Foundry.  In the first quarter of fiscal year 2013, the Company concluded its foundry arrangement with Toshiba.

Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled. These outstanding purchase commitments are included as part of the total “Noncancelable production purchase commitments” in the “Contractual Obligations” table.

Off-Balance Sheet Liabilities

Flash Ventures. Flash Ventures sells and leases back from a consortium of financial institutions (“lessors”) a portion of its tools and has entered into equipment master lease agreements totaling 262.6 billion Japanese yen, or approximately $2.79 billion based upon the exchange rate at March 31, 2013. As of March 31, 2013, the total amount outstanding from these master leases was 139.9 billion Japanese yen, or approximately $1.49 billion based upon the exchange rate at March 31, 2013, of which the amount of the Company’s guarantee obligation of the Flash Ventures’ master lease agreements, which reflects future payments and any lease adjustments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

The master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, the master lease agreements contain an acceleration clause for certain events of default related to the Company as guarantor, including, among other things, the Company’s failure to maintain a minimum stockholders’ equity of at least $1.51 billion, and for some of the leases, the Company’s failure to maintain a minimum corporate rating of BB- from Standard & Poors (“S&P”) or Moody’s Corporation (“Moody’s”), or a minimum corporate rating of BB+ from Rating & Investment Information, Inc. (“R&I”). As of March 31, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of March 31, 2013, the Company’s R&I credit rating was BBB, two notches above the required minimum corporate rating threshold from R&I; and the Company’s S&P credit rating was BB, one notch above the required minimum corporate rating threshold from S&P. If both S&P and R&I were to downgrade the Company’s credit rating below the minimum corporate rating threshold, the Company’s stockholders’ equity falls below $1.51 billion, or other events of default occur, Flash Ventures would become non-compliant under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by the Company, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a non-compliance event were to occur and if the Company failed to reach a resolution, the Company could be required to pay a portion or the entire outstanding lease obligations covered by its guarantees under such Flash Ventures master lease agreements.

26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at March 31, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.3	$	14,320	2014
January 2011	Refinanced	6.1		64,984		2014
November 2011	Refinanced	2.2		23,111		2014
March 2012	Refinanced	3.9		41,077		2015
		13.5		143,492
Flash Alliance
June 2008	Original	9.1		96,867		2013
March 2012	Original	8.0		85,367		2017
July 2012	Refinanced	15.2		160,736		2017
		32.3		342,970
Flash Forward
November 2011	Original	13.1		139,886		2016
March 2012	Original	8.0		85,217		2017
July 2012	Original	3.0		31,612		2017
		24.1		256,715
Total guarantee obligations		¥	69.9	$	743,177

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of March 31, 2013 in U.S. dollars based upon the yen/dollar exchange rate at March 31, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	154,103	$	88,197	$	242,300
Year 2	155,389		49,040		204,429
Year 3	105,202		12,152		117,354
Year 4	72,340		61,233		133,573
Year 5	19,261		26,260		45,521
Total guarantee obligations	$	506,295	$	236,882	$	743,177

27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Guarantees

Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged patent infringement. The scope of such indemnity varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. The Company may periodically engage in litigation as a result of these indemnification obligations. The Company’s insurance policies exclude coverage for third-party claims for patent infringement. Although the liability is not remote, the nature of the patent infringement indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its suppliers and customers. Historically, the Company has not made any significant indemnification payments under any such agreements. As of March 31, 2013, no amounts had been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

As permitted under Delaware law and the Company’s certificate of incorporation and bylaws, the Company has agreements, or has assumed agreements in connection with its acquisitions, whereby it indemnifies certain of its officers and employees, and each of its directors for certain events or occurrences while the officer, employee or director is, or was, serving at the Company’s or the acquired company’s request in such capacity. The term of the indemnification period is for the officer’s, employee’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited; however, the Company has a Director and Officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of March 31, 2013 or December 30, 2012, as these liabilities are not reasonably estimable even though liabilities under these agreements are not remote.

The Company and Toshiba have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company and Toshiba have also entered into a Patent Indemnification Agreement under which, in many cases, the Company will share in the expenses associated with the defense and cost of settlement associated with such claims. This agreement provides limited protection for the Company against third-party claims that NAND flash memory products manufactured and sold by Flash Ventures infringe third-party patents. The Company has not made any indemnification payments under any such agreements. As of March 31, 2013, no amounts have been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contractual Obligations and Off-Balance Sheet Arrangements

The following tables summarize the Company’s contractual cash obligations, commitments and off-balance sheet arrangements at March 31, 2013, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Contractual Obligations. Contractual cash obligations and commitments as of March 31, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 9 months in Fiscal 2013)		2 –3 Years (Fiscal 2014 and 2015)		4 –5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	12,257	(5)	$	3,911	$	7,277	$	1,069	$	—
Flash Partners (1)	527,765		(5)(6)	149,550		247,403		103,328		27,484
Flash Alliance (1)	1,547,797		(5)(6)	286,035		843,078		302,913		115,771
Flash Forward (1)	612,374		(5)(6)	179,225		265,307		140,319		27,523
Toshiba research and development	84,851		(5)	54,851		30,000		—		—
Capital equipment purchase commitments	55,189			55,029		127		33		—
1% Convertible senior notes principal and interest (2)	932,701			932,701		—		—		—
1.5% Convertible senior notes principal and interest (3)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	63,247			59,542		3,705		—		—
Noncancelable production purchase commitments (4)	261,325		(5)	261,325		—		—		—
Total contractual cash obligations	$	5,165,006		$	1,989,669	$	1,426,897	$	1,577,662	$	170,778

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Notes due 2013. The Company will pay cash interest on the outstanding notes at an annual rate of 1.0%, payable semi-annually on May 15 and November 15 of each year until May 15, 2013. In fiscal year 2011, the Company redeemed $221.9 million of the outstanding notes.

⁽³⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽⁴⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁵⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at March 31, 2013.

⁽⁶⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

The Company has excluded $204.5 million of unrecognized tax benefits (which includes penalties and interest) from the contractual obligation table above due to the uncertainty with respect to the timing of associated future cash flows at March 31, 2013. The Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Off-Balance Sheet Arrangements. Off-balance sheet arrangements are as follows (in thousands):

	March 31, 2013
Guarantee of Flash Ventures equipment leases (1)	$	743,177

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2013 through fiscal year 2017. Future minimum lease payments are presented below (in thousands):

	March 31, 2013
Fiscal year:
2013 (remaining nine months)	$	4,299
2014	4,593
2015	3,789
2016	1,211
2017	4
	13,896
Sublease income to be received in the future under noncancelable subleases	(1,639		)
Net operating leases	$	12,257

Net rent expense was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Rent expense, net	$	1,843	$	1,113

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Related Parties and Strategic Investments

Flash Ventures with Toshiba. The Company owns 49.9% of each entity within Flash Ventures and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 11, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are variable interest entities. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling $478.9 million and $687.4 million in the three months endedMarch 31, 2013 and April 1, 2012, respectively. The Company received loan repayments from Flash Ventures of $53.6 million and $63.8 million in the three months endedMarch 31, 2013 and April 1, 2012, respectively. At March 31, 2013 and December 30, 2012, the Company had accounts payable balances due to Flash Ventures of $176.4 million and $214.5 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	March 31, 2013		December 30, 2012
Notes receivable	$	696	$	820
Equity investments	590		640
Operating lease guarantees	743		926
Prepayments	21		26
Maximum loss exposure	$	2,050	$	2,412

Solid State Storage Solutions, Inc. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions, Inc. (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a variable interest entity. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Condensed Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012.

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Litigation

From time to time, we are involved in various litigation, including those described below, among others. The litigation proceedings in which we are involved from time to time may include matters such as intellectual property, antitrust, commercial, labor, class action, and insurance disputes. The semiconductor industry is characterized by significant litigation seeking to enforce patent and other intellectual property rights. The Company has enforced and likely will continue to enforce its own intellectual property rights through litigation and related proceedings.

In each case listed below where the Company is the defendant, the Company intends to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that losses related to the litigation described below have occurred beyond the amounts, if any, which have been accrued. However, legal discovery and litigation is highly unpredictable and future legal developments may cause current estimates to change in future periods.

Patent Infringement Litigation With Round Rock Research LLC. On October 27, 2011, in response to infringement allegations by Round Rock Research LLC (“Round Rock”), the Company filed a lawsuit against Round Rock in the U.S. District Court for the Northern District of California. The lawsuit seeks a declaratory judgment that twelve Round Rock patents are invalid and/or not infringed by flash memory products sold by the Company. Round Rock has since withdrawn its allegations of infringement as to three of the patents. SanDisk has filed motions for summary judgment of invalidity directed at two additional Round Rock patents, and Round Rock has filed a motion for summary judgment as to certain affirmative defenses asserted by SanDisk to the counterclaims in this action. These motions are currently pending. A claim construction hearing was held on January 16, 2013. Discovery is underway and expert discovery has not yet commenced in the case.

On May 3, 2012, Round Rock filed an action in the U.S. District Court for the District of Delaware alleging that the Company infringed eleven patents, and subsequently filed an amended complaint alleging that SanDisk’s infringement was willful. The parties agreed to dismiss one patent from this Delaware lawsuit that was also being litigated in the California case described above. Discovery is in its early phases, and the parties are scheduled to exchange claim construction positions on July 19, 2013. Trial is currently scheduled for September 29, 2014.

Ritz Camera Federal Antitrust Class Action. On June 25, 2010, Ritz Camera & Image, LLC (“Ritz”) filed a complaint in the U.S. District Court for the Northern District of California (the “District Court”), alleging that the Company violated federal antitrust law by conspiring to monopolize and monopolizing the market for flash memory products. The lawsuit captioned Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, purports to be on behalf of direct purchasers of flash memory products sold by the Company and joint ventures controlled by the Company from June 25, 2006 through the present. The complaint alleges that the Company created and maintained a monopoly by fraudulently obtaining patents and using them to restrain competition and by allegedly converting other patents for its competitive use. On February 24, 2011, the District Court issued an Order granting in part and denying in part the Company’s motion to dismiss which resulted in Dr. Harari being dismissed as a defendant. On September 19, 2011, the Company filed a petition for permission to file an interlocutory appeal in the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) for the portion of the District Court’s Order denying the Company’s motion to dismiss based on Ritz’s lack of standing to pursue Walker Process antitrust claims. On October 27, 2011, the District Court administratively closed the case pending the Federal Circuit’s ruling on the Company’s petition. On November 20, 2012, the Federal Circuit affirmed the District Court’s order denying SanDisk’s motion to dismiss. On December 2, 2012, the Federal Circuit issued its mandate returning the case to the District Court. Discovery is now open in the District Court. On February 20, 2013, Ritz filed a motion requesting that Albert Giuliano, the Chapter 7 Trustee of the Ritz bankruptcy estate, be substituted as the plaintiff in this case. The Court has not ruled on Ritz’s motion.

Samsung Federal Antitrust Action Against Panasonic and SD-3C. On July 15, 2010, Samsung Electronics Co., Ltd. (“Samsung”) filed an action in the U.S. District Court for the Northern District of California (the “District Court”) alleging various claims against Panasonic Corporation and Panasonic Corporation of North America (collectively, “Panasonic”) and SD-3C, LLC (“SD-3C”) under federal antitrust law pursuant to Sections 1 and 2 of the Sherman Act, and under California antitrust and unfair competition laws relating to the licensing practices and operations of SD-3C. The complaint seeks an injunction against collection of Secure Digital (“SD”) card royalties, treble damages, restitution, pre- and post-judgment interest, costs, and attorneys’ fees, as well as a declaration that Panasonic and SD-3C engaged in patent misuse and that the patents subject to such alleged misuse should be held unenforceable. The Company is not named as a defendant in this case, but it established SD-3C along with Panasonic and Toshiba, and the complaint includes various factual allegations concerning the Company. As a member of SD-3C, the Company may be responsible for a portion of any monetary award. Other requested

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

relief, including an injunction or declaration of patent misuse, could result in a loss of revenue to the Company. Defendants filed a motion to dismiss on September 24, 2010, and Samsung filed a First Amended Complaint (“FAC”) on October 14, 2010. On August 25, 2011, the District Court dismissed the patent misuse claim with prejudice, but gave Samsung leave to amend its other claims. On January 3, 2012, the District Court granted defendants’ motion to dismiss Samsung’s complaint without leave to amend. Samsung has appealed, dated January 25, 2012. The briefing on appeal is complete but a hearing date has not yet been set.

Federal Antitrust Class Action Against SanDisk, et al. On March 15, 2011, a putative class action captioned Oliver v. SD‑3C LLC, et al was filed in the U.S. District Court for the Northern District of California (the “District Court”) on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims against the Company, SD‑3C, Panasonic, Toshiba, and Toshiba America Electronic Components, Inc. under federal antitrust law pursuant to Section 1 of the Sherman Act, California antirust and unfair competition laws, and common law. The complaint seeks an injunction of the challenged conduct, dissolution of “the cooperation agreements, joint ventures and/or cross-licenses alleged herein,” treble damages, restitution, disgorgement, pre- and post-judgment interest, costs, and attorneys’ fees. Plaintiffs allege that the Company (along with the other members of SD‑3C) conspired to artificially inflate the royalty costs associated with manufacturing SD cards in violation of federal and California antitrust and unfair competition laws, which in turn allegedly caused plaintiffs to pay higher prices for SD cards. The allegations are similar to, and incorporate by reference the complaint in the Samsung Electronics Co., Ltd. v. Panasonic Corporation; Panasonic Corporation of North America; and SD‑3C LLC described above. On May 21, 2012, the District Court granted Defendants’ motion to dismiss the complaint with prejudice. Plaintiffs have appealed. Appellate briefing should be completed on June 21, 2013. No date for oral argument has been set.

Insurance Litigation. On November 30, 2012, the Company filed a complaint in the U.S. District Court for the Northern District of California against Zurich American Insurance Company (“Zurich”) for breach of an insurance contract issued by Zurich to the Company (the “Policy”). The action relates to Zurich’s denial of the Company’s claim under the Policy for coverage of losses suffered in connection with a power outage that occurred in December 2010 at the Fab 3 and Fab 4 facilities in Yokkaichi, Japan. The Company is seeking damages in an amount to be proven at trial, but in excess of approximately $60 million, less any applicable deductible, as well as costs and other associated remedies. Zurich filed its answer to the Company’s complaint on December 21, 2012. No trial date has been set.

33

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements in this report, which are not historical facts, are forward‑looking statements within the meaning of the federal securities laws. These statements may contain words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” or other wording indicating future results or expectations. Forward‑looking statements are subject to significant risks and uncertainties. Our actual results may differ materially from the results discussed in these forward‑looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, those discussed under “Risk Factors” in Part II, Item 1A, and elsewhere in this report. Our business, financial condition or results of operations could be materially harmed by any of these or other factors. We undertake no obligation to revise or update any forward‑looking statements to reflect any event or circumstance that arises after the date of this report. References in this report to “SanDisk^®,” “we,” “our,” and “us” refer collectively to SanDisk Corporation, a Delaware corporation, and its subsidiaries.

Overview

We are a global leader in flash memory storage solutions. Our goal is to provide simple, reliable and affordable storage solutions for consumer and enterprise use in a wide variety of formats and devices. We sell our products globally to commercial and retail customers.

We design, develop, market and manufacture data storage solutions in a variety of form factors using our flash memory, controller and firmware technologies. Our flash-based products enable businesses and consumers to efficiently and effectively capture, share, use and preserve digital content. Our solutions include solid state drives, or SSDs, removable cards, embedded products, universal serial bus, or USB, drives, digital media players, wafers and components. Our SSD products are used in client computing platforms and enterprise data centers to provide high-speed, high-capacity storage solutions that can be used in lieu of, or in conjunction with, hard disk drives. Our removable cards are used in a wide range of consumer electronics devices such as mobile phones, tablets, digital cameras, gaming devices and PCs. Our embedded flash products are used in mobile phones, tablets, thin-and-light laptops, eReaders, global positioning system, or GPS, devices, gaming systems, imaging devices and computing platforms.

We believe the markets for flash storage are generally price elastic, meaning that a decrease in the price per gigabyte results in increased demand for higher capacities and the emergence of new applications for flash storage. We strive to continuously reduce the cost of NAND flash memory in order to enable us to profitably grow our business, supply a diverse set of customers and channels, and continue to grow our markets. A key component of our ability to reduce the cost of NAND flash memory is our ability to continue to transition our NAND flash memory process technology to smaller nodes. We currently expect to be able to continue to scale our current NAND flash memory architecture, also known as planar NAND, through a few additional generations, but beyond that there is no certainty that further technology scaling can be achieved cost-effectively with the planar NAND flash memory architecture. We continue to invest in future generations of NAND flash memory, and we are also pursuing alternative technologies, such as Bit-cost scaleable 3-Dimensional NAND, or BiCS, and 3–Dimensional resistive RAM, or 3D ReRAM, technologies, both of which we believe may be viable alternatives to NAND flash memory when NAND flash memory can no longer cost-effectively scale at a sufficient rate, or at all. However, even when NAND flash memory can no longer scale further, we expect NAND flash memory and potential alternative technologies to coexist for an extended period of time. Currently, we are focused on transitioning our products to 19-nanometer and 1Y-nanometer technologies and improving manufacturing efficiencies. However, 1Y-nanometer technology will have increased manufacturing equipment requirements, which will impact the cost reduction benefits obtainable through these technologies.

Through our investments in our ventures with Toshiba Corporation, or Toshiba, and our in-house assembly and test facility, we have invested heavily in a vertically integrated business model. We purchase the vast majority of our NAND flash memory supply requirements through Flash Ventures, our significant flash venture relationships with Toshiba, which produce and provide us with leading-edge, low-cost memory wafers. Our manufacturing operations are concentrated in two locations, with Flash Ventures located in Yokkaichi, Japan, and our in-house assembly and test operations located in Shanghai, China. While we do not unilaterally control the operations of Flash Ventures, we believe that our vertically integrated business model helps us to reduce the costs of producing our products, increases our ability to control the quality of our products and speeds delivery to our customers.

We operate in an industry characterized by rapid technology transitions, price declines and evolving end-user markets for NAND flash memory. Historically, removable flash memory cards for imaging devices and USB drives provided the majority of our revenues. With the emergence of the smartphone and tablet markets, our sales of embedded NAND flash memory and cards for mobile phones, tablets, and other mobile devices have increased, and now represent the largest percentage of our revenues. Over the next several years, we believe that the largest growth areas for NAND flash memory will be SSD solutions

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in the client computing and enterprise data center markets, whereas the mobile market for NAND flash memory is expected to grow at a slower rate than in the past, and the retail market for NAND flash memory is expected to be approximately constant or declining. We continue to focus on adapting our business to the changing end-markets for NAND flash memory and aligning our resources accordingly.

Beginning in the first quarter of fiscal year 2013, we report only total revenues, which include product revenues and license and royalty revenues. In addition, during the first quarter of fiscal year 2013, we have recast our sales channels to be Retail and Commercial. Retail channel sales are made directly to retail customers and indirectly through distributors to retail customers. The Commercial channel includes original equipment manufacturer, or OEM, business-to-business, and direct enterprise customers as well as licensees. We have adjusted all prior year comparative amounts and explanations within Management’s Discussion and Analysis of Financial Condition and Results of Operations to reflect these changes in classification to be consistent for all periods presented.

Convertible Notes

Our 1% Notes due 2013 will mature on May 15, 2013. Upon maturity, we will be required to pay $928 million in cash to settle the principal amount outstanding under these notes. We intend to settle these notes using our current cash resources. In addition, the associated convertible bond hedge transaction and warrants will either be settled on a net share basis or expire unexercised based upon the closing stock price at maturity or on their respective expiration dates.

Results of Operations

	Three months ended
	March 31, 2013			% of Revenues		April 1, 2012			% of Revenues
	(In millions, except percentages)
Revenues	$1,340.7			100.0	%	$1,205.6			100.0	%
Cost of revenues	799.4			59.6	%	775.3			64.3	%
Amortization of acquisition-related intangible assets	9.8			0.8	%	13.8			1.1	%
Total cost of revenues	809.2			60.4	%	789.1			65.4	%
Gross profit	531.5			39.6	%	416.5			34.6	%
Operating expenses:
Research and development	171.1			12.8	%	141.0			11.7	%
Sales and marketing	59.1			4.3	%	49.0			4.1	%
General and administrative	45.1			3.4	%	32.6			2.7	%
Amortization and write-off of acquisition-related intangible assets	2.4			0.2	%	2.0			0.2	%
Total operating expenses	277.7			20.7	%	224.6			18.7	%
Operating income	253.8			18.9	%	191.9			15.9	%
Other income (expense), net	(19.9		)	(1.4	%)	(25.4		)	(2.1	%)
Income before income taxes	233.9			17.5	%	166.5			13.8	%
Provision for income taxes	67.7			5.1	%	52.1			4.3	%
Net income	$	166.2		12.4	%	$	114.4		9.5	%

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Revenues by Channel

	Three months ended
	March 31, 2013		% of Revenues		April 1, 2012		% of Revenues		Percent Change
	(In millions, except percentages)
Commercial	$	828.7	61.8	%	$	823.5	68.3	%	0.6	%
Retail	512.0		38.2	%	382.1		31.7	%	34.0	%
Total revenues	$	1,340.7	100.0	%	$	1,205.6	100.0	%	11.2	%

The increase in our revenues for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was due primarily to an increase in gigabytes sold of 36%, partially offset by a decline in average selling price per gigabyte of 18%. Commercial revenues for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, reflect significantly increased sales of SSDs and embedded products for mobile devices, largely offset by a decrease in revenue from OEM cards for the mobile market and wafers. Retail product revenues in the three months ended March 31, 2013 increased compared to the three months ended April 1, 2012 due to higher sales across all major regions and product lines, including imaging cards, mobile cards, USB drives and SSDs.

Our ten largest customers represented approximately 49% and 50% of our total revenues in the three months ended March 31, 2013 and April 1, 2012, respectively. We had two customers that exceeded 10% of our total revenues in the three months ended March 31, 2013, representing 19% and 12% of our total revenues. We had one customer that equaled 10% of our total revenues in the three months ended April 1, 2012.

Geographical Revenues

	Three months ended
	March 31, 2013		% of Revenues		April 1, 2012		% of Revenues		Percent Change
	(In millions, except percentages)
United States	$	213.5	15.9	%	$	170.6	14.1	%	25.1	%
Asia-Pacific	909.9		67.9	%	831.6		69.0	%	9.4	%
Europe, Middle East and Africa	173.6		12.9	%	146.8		12.2	%	18.3	%
Other foreign countries	43.7		3.3	%	56.6		4.7	%	(22.7	%)
Total revenues	$	1,340.7	100.0	%	$	1,205.6	100.0	%	11.2	%

For the three months ended March 31, 2013, compared to the three months ended April 1, 2012, our U.S. revenues increased primarily as a result of increased retail sales of mobile cards and SSDs. The increase in Asia-Pacific revenues was due primarily to increased sales of SSDs, mobile embedded products and retail cards and USB drives, partially offset by a decrease in mobile OEM cards and wafers and components. The increase in revenues in Europe, Middle East and Africa was due primarily to increased retail sales of mobile cards, USB drives and SSDs, partially offset by a decline in commercial sales of embedded products. Our revenues are designated based on the geographic location where the product is delivered, or in the case of license and royalty revenue, the location of the headquarters of the licensee, and therefore may not be indicative of the actual demand in these regions.

Gross Profit and Margin

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Gross profit	$	531.5		$	416.5		27.6	%
Gross margin	39.6		%	34.6		%

The increase in gross margin for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was due primarily to cost reductions of (25%) exceeding average selling price reductions of (18%). Costs per gigabyte improved over the prior year primarily due to wafer production transitioning from 24-nanometer to 19-nanometer, partially offset by an increase in non-flash memory costs as a result of an increased sales mix of SSDs and multi-chip package products, which have higher non-flash memory costs than most of our other products.

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Research and Development

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Research and development	$	171.1		$	141.0		21.3	%
Percent of revenues	12.8		%	11.7		%

The increase in our research and development expense for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was due primarily to higher employee-related costs of $21 million due primarily to increased headcount and incentive compensation expense and higher third-party engineering costs of $6 million. Incentive compensation expense is higher in the first quarter of fiscal year 2013, compared to the first quarter of fiscal year 2012, due to improved financial performance.

Sales and Marketing

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Sales and marketing	$	59.1		$	49.0		20.6	%
Percent of revenues	4.3		%	4.1		%

The increase in our sales and marketing expense for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was due primarily to higher employee-related costs of $9 million due primarily to increased headcount and incentive compensation expense. Incentive compensation expense is higher in the first quarter of fiscal year 2013, compared to the first quarter of fiscal year 2012, due to improved financial performance.

General and Administrative

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
General and administrative	$	45.1		$	32.6		38.3	%
Percent of revenues	3.4		%	2.7		%

The increase in our general and administrative expense for the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was due primarily to one-time insurance recoveries of legal fees of $5 million in the first quarter of fiscal year 2012, increased charitable contributions of $3 million and higher employee-related costs of $2 million due primarily to increased headcount and incentive compensation expense. Incentive compensation expense is higher in the first quarter of fiscal year 2013, compared to the first quarter of fiscal year 2012, due to improved financial performance.

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Amortization and Write-off of Acquisition-Related Intangible Assets

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Amortization and write-off of acquisition-related intangible assets	$	2.4		$	2.0		20.0	%
Percent of revenues	0.2		%	0.2		%

Amortization of acquisition-related intangible assets in the three months ended March 31, 2013, compared to the three months ended April 1, 2012, was higher due to a full quarter of amortization of intangible assets from fiscal year 2012 acquisitions.

Other Income (Expense), net

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Interest income	$	12.9		$	15.0		(14.0	%)
Interest expense	(31.0		)	(29.3		)	5.8	%
Other income (expense)	(1.8		)	(11.1		)	(83.8	%)
Total other income (expense), net	$	(19.9	)	$	(25.4	)	(21.7	%)

“Total other income (expense), net” for the three months ended March 31, 2013 was a lower net expense compared to the three months ended April 1, 2012 due primarily to a charge incurred by Flash Ventures and losses on non-designated foreign exchange contracts included in “Other income (expense)” in the first quarter of fiscal year 2012 that did not recur in fiscal year 2013.

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Provision for Income Taxes

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Provision for income taxes	$	67.7		$	52.1		29.9	%
Effective tax rate	28.9		%	31.3		%

The provision for income taxes for the three months ended March 31, 2013 differs from the U.S. statutory tax rate primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development, or R&D, credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to our Irish, Chinese, Israeli and Japanese entities. The lower effective tax rate for the three months ended March 31, 2013, compared to the same period in fiscal year 2012, is attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit in fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of March 31, 2013, we believe that most of our deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $176.2 million and $179.5 million as of March 31, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $83.2 million at March 31, 2013. Income tax expense for the first quarter of fiscal years 2013 and 2012 included interest and penalties of $0.7 million and $0.8 million, respectively.

We are subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service, or IRS, completed its field audit of our federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report.  The most significant proposed adjustments are comprised of related party transactions between our U.S. parent company and our foreign subsidiaries.  We are contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached. 

We strongly believe the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that our previously reported income tax provisions for the years in question are appropriate.  Management believes that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner that is not consistent with management’s expectations, we could be required to adjust our provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of our federal income tax returns for fiscal years 2009 through 2011. We do not expect a resolution of this audit to be reached during the next twelve months. In addition, we are currently under audit by various state and international tax authorities. We cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm our financial position, results of operations or liquidity.

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Non-GAAP Financial Measures

Reconciliation of Net Income.

	Three months ended
	March 31, 2013			April 1, 2012
	(In millions except per share and share amounts)
Net income	$	166.2		$	114.4
Share-based compensation	21.7			19.1
Amortization of acquisition-related intangible assets	12.2			15.8
Convertible debt interest	23.6			21.9
Income tax adjustments	(16.8		)	(14.8		)
Non-GAAP net income	$	206.9		$	156.4
Diluted net income per share:	$	0.68		$	0.46
Share-based compensation	0.09			0.08
Amortization of acquisition-related intangible assets	0.05			0.06
Convertible debt interest	0.10			0.09
Income tax adjustments	(0.07		)	(0.06		)
Non-GAAP diluted net income per share:	$	0.85		$	0.63
Shares used in computing diluted net income per share (in thousands):
GAAP	245,577			247,102
Non-GAAP	245,596			247,192

We believe these non-GAAP measures provide investors the ability to better assess and understand operating performance, especially when comparing results with previous periods or forecasting performance for future periods, primarily because management typically monitors the business excluding these items. We also use these non-GAAP measures to establish operational goals and for measuring performance for compensation purposes. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, and not as a replacement for, data presented in accordance with GAAP.

We believe that the presentation of non-GAAP measures, including non-GAAP net income and non-GAAP diluted net income per share, provides important supplemental information to management and investors about financial and business trends relating to our operating results. We believe that the use of these non-GAAP financial measures also provides consistency and comparability with our past financial reports.

We have historically used these non-GAAP measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described below provides an additional measure of our core operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. Externally, we believe that these non-GAAP measures continue to be useful to investors in their assessment of our operating performance and their valuation of our company.

Internally, these non-GAAP measures are significant measures used by us for purposes of:

•evaluating our core operating performance;

•establishing internal budgets;

•setting and determining variable compensation levels;

•calculating return on investment for development programs and growth initiatives;

•comparing performance with internal forecasts and targeted business models;

•strategic planning; and

•benchmarking performance externally against our competitors.

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We exclude the following items from our non-GAAP measures:

Share-based Compensation Expense.  These expenses consist primarily of expenses for share-based compensation, such as stock options, restricted stock units and our employee stock purchase plan. Although share-based compensation is an important aspect of the compensation of our employees and executives, we exclude share-based compensation expenses from our non-GAAP measures primarily because they are non-cash expenses. Further, share-based compensation expenses are based on valuations with many underlying assumptions not in our control that vary over time and may include modifications that may not occur on a predictable cycle, neither of which are necessarily indicative of our ongoing business performance. In addition, the share-based compensation expenses recorded are often unrelated to the actual compensation an employee realizes. We believe that it is useful to exclude share-based compensation expense for investors to better understand the long-term performance of our core operations and to facilitate comparison of our results to our prior periods and to our peer companies.

Amortization and Write-off of Acquisition-related Intangible Assets.  We incur amortization, and, occasionally, write-offs of intangible assets in connection with acquisitions.  Since we do not acquire businesses on a predictable cycle, we exclude these items in order to provide investors and others with a consistent basis for comparison across accounting periods.

Convertible Debt Interest. We incur non-cash economic interest expense relating to the implied value of the equity conversion component of the convertible debt. The value of the equity conversion component is treated as a debt discount and amortized to interest expense over the life of the notes using the effective interest rate method. We also incur interest expense equal to the change in fair value of the liability component of the convertible debt when we repurchase a portion of the convertible debt. We exclude these non-cash interest expenses that do not represent cash interest payments made to our note holders.

Income Tax Adjustments. This amount is used to present each of the amounts described above on an after-tax basis, considering jurisdictional tax rates, consistent with the presentation of non-GAAP net income.

From time-to-time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.

Limitations of Relying on Non-GAAP Financial Measures. We have incurred and will incur in the future, many of the costs that we exclude from the non-GAAP measures, including share-based compensation expense, impairment of goodwill and acquisition-related intangible assets, amortization and write-off of acquisition-related intangible assets and other acquisition-related costs, non-cash economic interest expense associated with our convertible debt and income tax adjustments. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies.

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Liquidity and Capital Resources

Cash Flows. Our cash flows were as follows:

	Three months ended
	March 31, 2013			April 1, 2012			Percent Change
	(In millions, except percentages)
Net cash provided by operating activities	$	473.6		$	67.2		604.8	%
Net cash used in investing activities	(338.9		)	(136.4		)	(148.5	%)
Net cash provided by (used in) financing activities	11.8			(5.9		)	300.0	%
Effect of changes in foreign currency exchange rates on cash	6.1			0.9			577.8	%
Net increase (decrease) in cash and cash equivalents	$	152.6		$	(74.2	)	305.7	%

Operating Activities. Cash provided by operating activities is generated by net income adjusted for certain non-cash items and changes in assets and liabilities.The increase in cash provided by operations in the first quarter of fiscal year 2013, compared to the first quarter of fiscal year 2012, resulted primarily from an increase in net income and a decrease in cash usage from other liabilities. Cash usage from other liabilities decreased primarily due to significantly lower tax and incentive compensation payments in the first quarter of fiscal year 2013 compared to the first quarter of fiscal year 2012. Cash flow from accounts receivable decreased primarily due to higher sales in the first quarter of fiscal year 2013 compared to the first quarter of fiscal year 2012. Cash flow from inventory resulted in an inflow of cash compared to the prior year due to a decrease in inventory balances. Cash flow from other assets resulted in a usage of cash compared to the prior year primarily due to a non-trade receivable balance in the current quarter that did not exist in the prior year. Cash flow from accounts payable to related parties increased due to the timing of payments to Flash Ventures as compared to the prior year.

Investing Activities. Net cash used in investing activities in the first quarter of fiscal year 2013 was primarily related to the net purchase of short and long-term marketable securities of ($344) million and acquisition of property and equipment of ($48) million, offset by repayments of notes receivables from Flash Ventures of $54 million. In the first quarter of fiscal year 2012, net cash used in investing activities was primarily related to acquisition of property and equipment of ($144) million and acquisitions, net of cash acquired of ($55) million, offset by net proceeds from short and long-term marketable securities of $62 million.

Financing Activities. Net cash provided by financing activities in the first quarter of fiscal year 2013 was primarily related to cash received from employee stock programs of $93 million, offset by share repurchases of ($90) million. Net cash used by financing activities in the first quarter of fiscal year 2012 was primarily related to our share repurchase program of ($61) million, offset by cash received from employee stock programs of $45 million.

Liquid Assets. At March 31, 2013, we had cash, cash equivalents and short-term marketable securities of $3.31 billion. We had $2.88 billion of long-term marketable securities, which we believe are also liquid assets, but are classified as long-term marketable securities due to the remaining effective maturity of the investment being greater than one year.

Short-Term Liquidity. As of March 31, 2013, our working capital balance was $2.98 billion. During fiscal year 2013, we expect our cash usage for net investments in Flash Ventures and non-fab property and equipment to be approximately $350 million. Our current estimate of capital investments for the Flash Ventures includes productivity and technology transition investments, and does not include any new wafer capacity additions. In the first quarter of fiscal year 2013, we received cash from notes receivable repayments from Flash Ventures of $54 million and our cash usage for non-fab property and equipment investments was $48 million.

At March 31, 2013, we had $928 million aggregate principal amount of our 1% Notes due on May 15, 2013, which we expect to settle in cash upon maturity.

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Depending on the demand for our products, we may decide to make additional investments, which could be substantial, in wafer fabrication foundry capacity and assembly and test manufacturing equipment to support our business. We may also make equity investments in other companies, engage in merger or acquisition transactions, or purchase or license technologies. These activities may require us to raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory amounts, could prevent us from funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, taking advantage of future opportunities, engaging in investments in or acquisitions of companies, growing our business, or responding to competitive pressures or unanticipated industry changes, any of which could harm our business.

Our short-term liquidity is impacted in part by our ability to maintain compliance with covenants in the outstanding Flash Ventures master lease agreements. The Flash Ventures master lease agreements contain customary covenants for Japanese lease facilities as well as an acceleration clause for certain events of default related to us as guarantor, including, among other things, our failure to maintain a minimum shareholder equity of at least $1.51 billion, and our failure to maintain a minimum corporate rating of BB- from Standard & Poors, or S&P, or Moody’s Corporation, or Moody’s, or a minimum corporate rating of BB+ from Rating & Investment Information, Inc., or R&I. As of March 31, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of March 31, 2013, our R&I credit rating was BBB, two notches above the required minimum corporate rating threshold for R&I; and our S&P credit rating was BB, one notch above the required minimum corporate rating threshold for S&P.

If our shareholders’ equity falls below $1.51 billion, or both S&P and R&I were to downgrade our credit rating below the minimum corporate rating threshold, or other events of default occur, Flash Ventures would become non-compliant with certain covenants under certain master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by us, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a resolution was unsuccessful, we could be required to pay a portion or up to the entire $743 million outstanding lease obligations covered by our guarantees under such Flash Ventures master lease agreements, based upon the exchange rate at March 31, 2013, which would negatively impact our short-term liquidity.

As of March 31, 2013, the amount of cash and cash equivalents and short and long-term marketable securities held by foreign subsidiaries was $850 million. We provide for U.S. income taxes on the earnings of foreign subsidiaries unless the earnings are considered indefinitely invested outside of the U.S. As of December 30, 2012, no provision had been made for U.S. income taxes or foreign withholding taxes on $583 million of undistributed earnings of foreign subsidiaries since we intend to indefinitely reinvest these earnings outside the U.S. We determined that the calculation of the amount of unrecognized deferred tax liability related to these cumulative unremitted earnings was not practicable. If these earnings were distributed to the U.S., we would be subject to additional U.S. income taxes and foreign withholding taxes reduced by available foreign tax credits.

Our Board of Directors has authorized up to $1.25 billion for stock repurchases, of which $0.93 billion remained available for stock repurchases as of March 31, 2013. As of March 31, 2013, we had cumulatively repurchased 7.5 million shares for $324 million, of which 1.8 million shares for $90 million were repurchased in the first quarter of fiscal year 2013 at an average price of $50.97. Under this program, share purchases may be made, from time-to-time, in both the open market and privately negotiated transactions, and may include the use of derivative contracts, structured stock repurchase agreements and Rule 10b5-1 trading plans. The stock repurchase program does not obligate us to purchase any particular amount of shares.

Long-Term Requirements. Depending on the demand for our products, we may decide to make additional investments, which could be substantial, in wafer fabrication foundry capacity and assembly and test manufacturing equipment to support our business. We may also make equity investments in other companies, engage in merger or acquisition transactions, or purchase or license technologies. These activities may require us to raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory amounts, could prevent us from funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, taking advantage of future opportunities, engaging in investments in or acquisitions of companies, growing our business, responding to competitive pressures or unanticipated industry changes, any of which could harm our business.

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Financing Arrangements. At March 31, 2013, we had $928 million aggregate principal amount of 1% Notes due 2013 outstanding and $1.00 billion aggregate principal amount of 1.5% Notes due 2017 outstanding. See Note 6, “Financing Arrangements,” in the Notes to Condensed Consolidated Financial Statements of this Form 10‑Q for more detail.

Concurrent with the issuance of the 1% Notes due 2013, we sold warrants to acquire shares of our common stock at an exercise price of $95.03 per share. As of March 31, 2013, the warrants had an expected life of approximately 0.4 years and expire on 20 different dates from August 23, 2013 through September 20, 2013. At expiration, we may, at our option, elect to settle the warrants on a net share basis. In addition, concurrent with the issuance of the 1% Notes due 2013, we entered into a convertible bond hedge in which counterparties agreed to sell to us up to approximately 14.0 million shares of our common stock, which is the number of shares initially issuable upon conversion of the 1% Notes due 2013 in full, at a conversion price of $82.36 per share. During fiscal year 2011, concurrent with the repurchase of a portion of the outstanding 1% Notes due 2013, we unwound a pro-rata portion of the convertible bond hedge and warrants and received net proceeds of $0.3 million from this unwinding, which was recorded in equity. We may now purchase up to 11.3 million shares of our common stock at a conversion price of $82.36 per share. As of March 31, 2013, none of the remaining warrants had been exercised nor had we purchased any shares under the remaining convertible bond hedge. The convertible bond hedge will be settled in net shares and will terminate upon the earlier of the maturity date of the 1% Notes due 2013 or the first day that none of the 1% Notes due 2013 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in us receiving net shares equivalent to the number of shares issuable by us upon conversion of the 1% Notes due 2013.

Concurrent with the issuance of the 1.5% Notes due 2017, we sold warrants to acquire shares of our common stock at an exercise price of $73.33 per share. As of March 31, 2013, the warrants had an expected life of approximately 4.7 years and expire on 40 different dates from November 13, 2017 through January 10, 2018. At each expiration date, we may, at our option, elect to settle the warrants on a net share basis. As of March 31, 2013, the warrants had not been exercised and remained outstanding. In addition, concurrent with the issuance of the 1.5% Notes due 2017, we entered into a convertible bond hedge transaction in which counterparties agreed to sell to us up to approximately 19.1 million shares of our common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a conversion price of $52.37 per share. The convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day none of the 1.5% Notes due 2017 remains outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares, based on the number of shares issuable upon conversion of the 1.5% Notes due 2017, on the expiration date would result in us receiving net shares equivalent to the number of shares issuable by us upon conversion of the 1.5% Notes due 2017. As of March 31, 2013, we had not purchased any shares under this convertible bond hedge agreement

Ventures with Toshiba. We are a 49.9% owner in each of the Flash Ventures, our business ventures with Toshiba to develop and manufacture NAND flash memory products. These NAND flash memory products are manufactured by Toshiba at Toshiba’s Yokkaichi, Japan operations using the semiconductor manufacturing equipment owned or leased by these ventures. This equipment is funded or will be funded by investments in or loans to the Flash Ventures from us and Toshiba as well as through operating leases received by Flash Ventures from third-party banks and guaranteed by us and Toshiba. These ventures purchase wafers from Toshiba at cost and then resell those wafers to us and Toshiba at cost plus a markup. We are contractually obligated to purchase half of these ventures’ NAND wafer supply or pay for 50% of the fixed costs of these ventures. We are not able to estimate our total wafer purchase obligations beyond our rolling three month purchase commitment because the price is determined by reference to the future cost to produce the wafers. See Note 12, “Related Parties and Strategic Investments,” in the Notes to Condensed Consolidated Financial Statements of this Form 10‑Q.

As of March 31, 2013, Phase 1 of Fab 5 was equipped to a portion of the potential equipment capacity and we had invested in 50% of that equipment. During the remainder of fiscal year 2013, we do not expect to add new wafer capacity; however, we expect to invest in productivity improvements that may result in limited incremental wafer capacity. See Note 11, “Commitments, Contingencies and Guarantees,” in the Notes to Condensed Consolidated Financial Statements of this Form 10–Q.

The cost of the wafers we purchase from Flash Ventures is recorded in inventory and ultimately cost of revenues. Flash Ventures are variable interest entities; however, we are not the primary beneficiary of these ventures because we do not have a controlling financial interest in each venture. Accordingly, we account for our investments under the equity method and do not consolidate.

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For semiconductor manufacturing equipment that is leased by Flash Ventures, we and Toshiba jointly guarantee on an unsecured and several basis, 50% of the outstanding Flash Ventures’ lease obligations under original master lease agreements entered into by Flash Ventures. These master lease obligations are denominated in Japanese yen and are noncancelable. Our total master lease obligation guarantee as of March 31, 2013 was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

In the first quarter of fiscal year 2011, we made a $62 million prepayment for Flash Forward Ltd., or Flash Forward, building-related costs. As of March 31, 2013, approximately $21 million was remaining, which was classified as Other current assets.

From time-to-time, we and Toshiba mutually approve the purchase of equipment for the Flash Ventures in order to convert to new process technologies or add wafer capacity. Flash Partners Ltd., or Flash Partners, and Flash Alliance Ltd., or Flash Alliance have been previously equipped to full wafer capacity.  The wafer capacity of Flash Forward has been partially equipped.

Contractual Obligations and Off-Balance Sheet Arrangements

Our contractual obligations and off-balance sheet arrangements at March 31, 2013, and the effect those contractual obligations are expected to have on our liquidity and cash flow over the next five years are presented in textual and tabular format in Note 11, “Commitments, Contingencies and Guarantees,” of the Notes to Condensed Consolidated Financial Statements of this Form 10‑Q.

Impact of Currency Exchange Rates

Exchange rate fluctuations could have a material adverse effect on our business, financial condition and results of operations. Our most significant foreign currency exposure is to the Japanese yen in which we purchase the vast majority of our NAND flash wafers. In addition, we also have significant costs denominated in the Chinese renminbi and the Israeli new shekel, and we have revenue denominated in the European euro, the British pound, the Japanese yen, the Chinese renminbi and the Canadian dollar. We do not enter into derivatives for speculative or trading purposes. We use foreign currency forward and cross currency swap contracts to mitigate transaction gains and losses generated by certain monetary assets and liabilities denominated in currencies other than the U.S. dollar. From time-to-time, we use foreign currency forward contracts and options to partially hedge our future Japanese yen costs for NAND flash wafers. Our derivative instruments are recorded at fair value in assets or liabilities with final gains or losses recorded in other income (expense) or as a component of accumulated other comprehensive income, or AOCI, and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized. These foreign currency exchange exposures may change over time as our business and business practices evolve, and they could harm our financial results and cash flows. See Note 3, “Derivatives and Hedging Activities,” in the Notes to Condensed Consolidated Financial Statements of this Form 10‑Q.

Because we purchase the vast majority of our flash memory wafers from Flash Ventures, our flash memory costs, which represent the largest portion of our cost of revenues, are based upon wafer purchases denominated in Japanese yen.  However, our cost of revenues in any given quarter generally reflect wafer purchases that were made in the previous quarter, and are impacted by hedging decisions we may make from time to time, including entering into forward contracts or other instruments to hedge our future Japanese yen purchase rate.  Based on wafer purchases made in the fourth quarter of 2012 and forward contracts entered into for early 2013, changes in the Japanese yen to U.S. dollar exchange rate after December 2012 are not expected to have a material impact on our cost of revenues in the first half of fiscal year 2013. We expect the average rate of the Japanese yen to the U.S. dollar for the wafer purchase portion of our cost of revenues to be approximately 86 for the second quarter of fiscal 2013. In addition, we have locked in approximately half of the yen purchases that we expect will impact our third quarter cost of sales at a yen rate of approximately 95. See Item 3, “Quantitative and Qualitative Disclosure About Market Risk - Foreign Currency Risk” for more information about our foreign currency forward and cross currency swap contracts.

For a discussion of foreign operating risks and foreign currency risks, see Part II, Item 1A, “Risk Factors.”

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Critical Accounting Policies

Our discussion and analysis of our financial condition and operating results is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, we evaluate estimates, including those related to customer programs and incentives, intellectual property claims, product returns, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. We base our estimates on historical experience and on other assumptions that we believe are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

There were no significant changes to our critical accounting policies during the fiscal quarter ended March 31, 2013. For information about critical accounting policies, see the discussion of critical accounting policies in our most recent Annual Report on Form 10‑K filed with the U.S. Securities and Exchange Commission on February 19, 2013.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates.

Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. As of March 31, 2013, a hypothetical 50 basis point increase in interest rates would result in an approximate $30.9 million decline (less than 0.60%) of the fair value of our available-for-sale debt securities.

Foreign Currency Risk. The majority of our revenues are transacted in the U.S. dollar, with some revenues transacted in the European euro, the British pound, the Japanese yen, the Chinese renminbi and the Canadian dollar. Our flash memory costs, which represent the largest portion of our cost of revenues, are denominated in Japanese yen. We also have some cost of revenues denominated in the Chinese renminbi. The majority of our operating expenses are denominated in the U.S. dollar; however, we have expenses denominated in Japanese yen, the Chinese renminbi, the Israeli new shekel and numerous other currencies. On the balance sheet, we have numerous foreign currency denominated monetary assets and liabilities, with the largest monetary exposure being our balances with Flash Ventures, which are denominated in Japanese yen.

We enter into foreign currency forward and cross currency swap contracts to hedge the gains or losses generated by the remeasurement of our significant foreign currency denominated monetary assets and liabilities. The fair value of these contracts is reflected as other assets or other liabilities and the change in fair value of these balance sheet hedge contracts is recorded into earnings as a component of other income (expense) to largely offset the change in fair value of the foreign currency denominated monetary assets and liabilities which is also recorded in other income (expense).

We use foreign currency forward contracts to partially hedge future Japanese yen flash memory costs. These contracts are designated as cash flow hedges and are carried on our balance sheet at fair value with the effective portion of the contracts’ gains or losses included in accumulated other comprehensive income and subsequently recognized in cost of revenues in the same period the hedged cost of revenues is recognized.

At March 31, 2013, we had both foreign currency forward contracts and cross currency swap contracts in place that amounted to a net purchase in U.S. dollar equivalents of $63.6 million in foreign currencies to hedge our foreign currency denominated monetary net liability position over the next twelve months. The notional amount and unrealized gain or loss of our outstanding cross currency swap and foreign currency forward contracts that are non-designated (balance sheet hedges) as of March 31, 2013 are shown in the table below. In addition, this table shows the change in fair value of these balance sheet hedges assuming a hypothetical adverse foreign currency exchange rate movement of 10 percent. These changes in fair values would be largely offset in other income (expense) by corresponding changes in the fair values of the foreign currency denominated monetary assets and liabilities.

	Notional Amount			Unrealized Gain (Loss) as of March 31, 2013			Change in Fair Value Due to 10% Adverse Rate Movement
	(In millions)
Balance sheet hedges
Cross currency swap contracts sold	$	(30.8	)	$	3.9		$	2.8
Forward contracts sold	(101.7		)	4.4			(1.8		)
Forward contracts purchased	196.1			(15.3		)	(12.7		)
Total net outstanding contracts	$	63.6		$	(7.0	)	$	(11.7	)

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At March 31, 2013, we had foreign currency forward contracts in place that amounted to a net purchase in a U.S. dollar equivalent of approximately $131.0 million to partially hedge our expected future wafer purchases in Japanese yen. The maturities of these contracts were 12 months or less. The notional amount and fair value of our outstanding forward contracts that are designated as cash flow hedges as of March 31, 2013 is shown in the table below. In addition, this table shows the change in fair value of these cash flow hedges assuming a hypothetical adverse foreign currency exchange rate movement of 10 percent.

	Notional Amount		Fair Value as of March 31, 2013			Change in Fair Value Due to 10% Adverse Rate Movement
	(In millions)
Cash flow hedges
Forward contracts purchased	$	131.0	$	(12.9	)	$	(11.9	)

Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our foreign currency exposures, and there can be no assurances that our mitigating activities related to the exposures that we hedge will adequately protect us against risks associated with foreign currency fluctuations.

Market Risk. With the U.S. long-term sovereign credit rating below the highest available rating and the risk of additional future downgrades or related downgrades by recognized credit rating agencies, the investment choices for our cash and marketable securities portfolio could be reduced, which could negatively impact our non-operating results. We do not have direct ownership of European sovereign debt in our investment portfolio. Sales to Europe accounted for approximately 13% of our total revenues in the first quarter of fiscal year 2013, and any significant uncertainties in the European financial markets could impact our revenues and financial condition in Europe or elsewhere.

All of the potential changes noted above are based on sensitivity analysis performed on our financial position at March 31, 2013. Actual results may differ materially.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of March 31, 2013. Based on their evaluation as of March 31, 2013, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this Quarterly Report on Form 10‑Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings, see Note 13, “Litigation,” in the Notes to Condensed Consolidated Financial Statements of this Form 10‑Q.

Item 1A. Risk Factors

The following description of the risk factors associated with our business includes any material changes to and supersedes the description of the risk factors associated with our business previously disclosed in Part 1, Item 1A of our Annual Report on Form 10‑K for the fiscal year ended December 30, 2012.

Our operating results may fluctuate significantly, which may harm our financial condition and our stock price. Our quarterly and annual operating results have fluctuated significantly in the past and we expect that they will continue to fluctuate in the future.  Our results of operations are subject to fluctuations and other risks, including, among others:

• competitive pricing pressures, resulting in lower average selling prices and lower revenues;

• inability to reduce manufacturing costs to keep pace with reductions in average selling prices, resulting in lower or negative product gross margins;

• excess, insufficient or mismatched captive memory output or capacity, resulting in lower average selling prices, financial charges and impairments, lost revenue and market growth opportunities, lower gross margins or other consequences;

• timing, volume and cost of wafer production from Flash Ventures as impacted by fab start-up delays and costs, technology transitions, lower than expected yields or production interruptions;

• inability to penetrate new or growing markets for flash memory, including the SSD markets, failure of existing or new markets for flash memory to grow or develop, or failure to maintain or improve our position in any of these markets;

• potential delays in product development or lack of customer acceptance of our solutions, particularly OEM products such as our embedded flash storage solutions and SSD solutions;

• fluctuations in customer concentration and the loss of, or reduction in orders from, one or more of our major customers that account for a significant portion of our revenues;

• lengthy, costly and unpredictable design, qualification and sales processes for a limited number of customers in the enterprise SSD market;

• inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable yields, new technologies such as 1Y-nanometer or subsequent process technologies, X3 NAND memory architecture, BiCS technology, 3D ReRAM, or other advanced alternative technologies;

• increased costs and lower gross margins due to potentially higher warranty claims from our more complex SSD solutions and firmware;

• excess inventory or lost sales resulting from unpredictable or changing demand for our products;

• failure to manage the risks associated with our ventures and strategic partnerships with Toshiba;

• fluctuations or declines in our license and royalty revenues due to license agreement renewals on less favorable terms, non-renewals, declines in sales of the products or use of technology underlying the license and royalty revenues by our licensees, or if licensees or we fail to perform on contractual obligations;

• insufficient non-flash memory materials or capacity from our suppliers and contract manufacturers to meet demand or increases in the cost of non-flash memory materials or capacity;

• fluctuations in our product gross margins due to changes in product mix and customer mix, as well as variations in the technologies or form factors of our products;

• disruptions in our supply chain, whether due to natural disasters, emergencies such as power outages, fires or chemical spills, or employee strikes or other job actions;

• inability to enhance current products, develop new products or transition products to new technologies on a timely basis or in advance of our competitors;

• increased memory component and other costs as a result of currency exchange rate fluctuations for the U.S. dollar, particularly with respect to the Japanese yen;

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• inability to obtain non-captive memory supply of the right product mix and quality in the time frame necessary to meet demand, or inability to realize an adequate margin on non-captive purchases;

• insufficient assembly and test or retail packaging and shipping capacity from our Shanghai, China facility or our contract manufacturers, or labor unrest, employee strikes or other disruptions at any of these facilities;

• errors or defects in our products caused by, among other things, errors or defects in the memory or controller components, including memory and non-memory components we procure from third-party suppliers;

• the financial strength and market position of our customers; and

• the other factors described in this “Risk Factors” section and elsewhere in this report.

Competitive pricing pressures may result in lower average selling prices for our products, and if such price declines are not offset by a corresponding increase in demand for our products, our revenues may decline. The price of NAND flash memory is influenced by, among other factors, the balance between supply and demand, including the effects of new fab capacity, macroeconomic factors and business conditions, technology transitions, conversion of industry DRAM capacity to NAND, and new technologies or other actions taken by us or our competitors to gain market share. In particular, the NAND flash memory industry has, from time-to-time, experienced periods of excess supply, resulting in significant price declines. Industry capacity is expected to continue to grow, and if capacity grows at a faster rate than market demand, the industry could again experience significant price declines. If we are not able to offset significant price declines with sufficient increases in unit sales or average memory capacity per unit or a shift in product mix towards products with higher average selling prices, our revenues and operating results may be harmed.

If we are unable to reduce our manufacturing costs to keep pace with reductions in average selling prices, our gross margins may be harmed. Because of the historical and expected future declines in the price of NAND flash memory, we need to reduce our manufacturing costs in order to maintain adequate gross margins. Our ability to reduce our cost per gigabyte of memory produced depends on technology transitions and the improvement of manufacturing efficiency, including manufacturing yields. If our technology transitions (for example, the production ramp of NAND technology on the 1Y-nanometer process node) take longer or are more costly to complete than anticipated, our manufacturing costs may not remain competitive with other flash memory producers, which would harm our gross margins and financial results. Furthermore, the inherent physical technology limitations of NAND flash technology may result in more costly technology transitions than we have experienced in the past, particularly with respect to required capital expenditures, which could further limit our ability to keep pace with reductions in average selling prices. Manufacturing yields are a function of both design and manufacturing process technology, and yields may also be impacted by equipment malfunctions, fabrication facility accidents or human error. Yield problems may not be identified during the production process or solved until an actual product is manufactured and tested, further increasing our costs. If we are unable to improve manufacturing yields or other manufacturing efficiencies, our gross margins and results of operations would be harmed.

Our reliance on and investments in captive manufacturing capacity limit our ability to respond to industry fluctuations in supply and demand. The semiconductor industry, and the NAND flash memory industry in particular, is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence, price declines, evolving standards, short product life cycles and wide fluctuations in product supply and demand. We are limited in our ability to react or adjust our cost structure in response to these cyclical fluctuations. We rely on our significant investments in Flash Ventures as a captive source of the vast majority of our NAND flash memory supply. Growth in our captive memory supply comes from investments in technology transitions and new capacity at Flash Ventures. These investment decisions require significant planning and lead-time before an increase in supply can be realized, and are further determined by factors such as the timing, rate and type of investment by us and Toshiba, our partner in Flash Ventures, agreement between us and Toshiba as to these matters, our evaluation of the potential return on investment of the addition of new capacity, particularly in light of the timing, cost and availability of next generation technology, our profitability, our estimation of market demand and our liquidity position. A failure to accurately forecast demand for our products or industry capacity could cause us to over-invest or under-invest in the expansion of captive memory capacity in Flash Ventures. Over-investment could result in excess supply, which could cause significant decreases in our product prices, significant excess, obsolete or lower of cost or market inventory write-downs or under-utilization charges, and the potential impairment of our investments in Flash Ventures. For example, in fiscal year 2008 and the first quarter of fiscal year 2009, we recorded charges for adverse purchase commitments associated with under-utilization of Flash Ventures’ capacity. On the other hand, if we or Toshiba under-invest in captive memory capacity or technology transitions, we may not have enough captive supply to meet demand on a timely and cost effective basis and we may lose opportunities for revenue growth and market share as a result, which would harm our ability to grow revenues. In such cases, we may have only a limited ability to satisfy our supply needs from non-captive supply sources and may not be able to obtain the right mix of non-captive product within an adequate lead time or at a cost that allows us to generate an adequate gross margin. Furthermore, if our memory supply is limited, we may make strategic decisions with respect to the allocation of our supply among our products and customers that may preserve our long-term goals and customer relationships but result in

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short-term declines in our gross margin or less favorable gross margins. Our customers also may not allow us to change the memory in the products that they have already qualified. Our inability to obtain sufficient cost-effective non-captive memory that meets our requirements may cause us to lose sales, market share and profits, which would harm our operating results. In addition, we are contractually obligated to pay for 50% of the fixed costs of Flash Ventures regardless of whether we purchase any wafers from Flash Ventures. Furthermore, purchase orders placed under Flash Ventures and the foundry arrangement with Toshiba for up to three months are binding and cannot be canceled. Therefore, once our purchase decisions have been made, our production costs are fixed, and we may be unable to reduce costs to match any subsequent declines in pricing or demand, which would harm our gross margins. Our limited ability to react to fluctuations in supply and demand makes us particularly susceptible to variations from our forecasts and expectations, and even in times of excess demand, our operating results may be harmed.

The future growth of our business depends on the development and performance of new and growing, as well as existing, markets and products for flash memory, including the SSD markets, and on our ability to maintain or improve our position in these markets. Historically, removable flash memory cards and USB drives, both sold primarily through the retail channel, provided the majority of our revenues. As growth in these retail products slowed, we increased sales of embedded NAND flash memory for devices such as mobile phones, tablets, and other mobile devices, which now represent the largest percentage of our product revenues. Our future growth is dependent on the development of new markets, new applications and new products for flash memory, and to a more limited extent, on our ability to maintain or improve our position in existing markets for flash memory. There can be no assurance that the use of NAND flash memory in existing markets and products will continue or grow fast enough, or at all, that we will be able to maintain or improve our position in existing markets, or that new markets will adopt flash technologies in general or our products in particular, to enable us to grow.

Over the next several years, we believe that the largest growth areas for NAND flash will be SSD solutions in client computing and enterprise data center applications, whereas the mobile market for NAND flash is expected to grow at a slower rate than in the past, and the retail market for NAND flash is expected to be approximately constant or declining. We will continue to make significant investments in the development of hardware and software solutions for SSD markets in order to successfully penetrate and gain market share in SSD solutions. Our ability to succeed in the SSD solutions market is subject to various risks and uncertainties, including, among other things:

• we may be unable to successfully develop or qualify SSD solutions that meet our customers’ requirements, and we cannot guarantee that customers will adopt our SSD solutions even if we do;

• designing and qualifying products in the SSD solutions market will require greater investments and customization than our traditional markets, which may result in higher costs than our traditional products;

• we may not be able to transition customers to our leading edge products which would prevent us from getting the full cost advantage of new technology transitions due to longer customer product cycles in the SSD solutions market;

• SSD solutions require more software than our traditional products, therefore we must continue to develop software expertise;

• SSD solutions require more complex controllers than our traditional products, and we may be unable to develop or source controllers that meet the performance requirements of SSDs;

• SSD solutions incorporate unique non-flash memory parts, and if there is lower than expected demand, we may not be able to incorporate these unique parts in other non-SSD products;

• SSD solutions require longer production cycle times due to, among other things, more complex assembly and testing to produce a finished product, as well as customer requirements for consigned inventory, which could lead to higher levels and cost of inventory;

• SSD solutions require different go-to-market strategies compared to our historical consumer and mobile products, which could increase our operating expenses, and we may be unable to build an effective sales and marketing operation to sell our SSD solutions.

If we are unable to successfully develop, qualify and sell SSD solutions, we could lose sales and corresponding profit opportunities, which would harm our operating results.

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Our revenues depend in large part on our ability to achieve design wins with OEM customers and the success of products sold by our OEM customers. Our primary OEM products include cards for mobile devices, embedded memory products, and SSDs for the notebook and server markets. Our OEM revenue is primarily dependent upon our products meeting OEM specifications and the achievement of design wins in an OEM’s products such as mobile phones, tablets, computers and enterprise servers. Even if our products meet OEM specifications, our sales to these customers are dependent upon the OEMs choosing our products over those of our competitors, on the OEMs’ ability to create, market and sell their products successfully, and our ability to supply our products in sufficient quantity and in a timely manner. For example, in the first half of fiscal year 2012, our OEM sales declined because our next generations of mobile embedded products were in various stages of development and qualification, and because mobile OEM customers reduced their rate of card bundling and bundled lower capacity cards. If our OEM customers are not successful in selling their current or future products in sufficient volume or in a timely manner, or should they decide not to use our products, or should they further reduce their card bundling or bundle lower capacity cards, or should we not be able to produce our products in sufficient quantity or quality, our revenues, operating results and financial condition could be harmed.

Sales to a small number of customers represent a significant portion of our revenues, and if we were to lose one or more of our major customers or licensees, or experience any material reduction in orders from any of our customers, our revenues and operating results could suffer. Our ten largest customers represented approximately 49% and 50% of our total revenues in the three months ended March 31, 2013 and April 1, 2012, respectively. We had two customers that exceeded 10% of our total revenues in the three months ended March 31, 2013, representing 19% and 12% of our total revenues. We had one customer that equaled 10% of our total revenues in the three months ended April 1, 2012. The composition of our major customer base has changed over time, including shifts between OEM and retail-based customers, and there have been changes in the market share concentration among our customers. We expect fluctuations in our customer and licensee base and the mix of our revenue by customer and licensee to continue as our markets and strategies evolve, which could make our revenues less predictable from period-to-period. Our sales are generally made from standard purchase orders and short-term commitments rather than long-term contracts. Accordingly, our customers, including our major customers, may generally terminate or reduce their purchases from us at any time with limited notice or penalty. If we were to lose one or more of our major customers or licensees, or experience any material reduction in orders from any of our customers or in sales of licensed products by our licensees, our revenues and operating results could suffer.

Our SSD products are more complex and rely on more sophisticated firmware than our other products, which may result in increased costs and lower gross margins due to more frequent product updates. Our SSD solutions are more complex than our traditional products due to, among other things, an increased dependence on more sophisticated firmware and customization of our products for specific OEM customers. Changes in our OEM customers’ specifications for these products could require us to update the firmware for our SSD products, which results in increased costs for processing these updates. Furthermore, our failure to update our products to comply with the new specifications may result in reduced demand from our customers for a particular SSD solution, notwithstanding the long design, qualification and test cycles we have undertaken as part of our sales process for that solution, which may harm our results of operations.

Our enterprise SSD business is characterized by sales to a limited number of customers with long design, qualification and sales processes. The enterprise SSD market is comprised of a relatively limited number of customers, with long design, qualification and test cycles prior to sales. OEM customers in the enterprise SSD market typically also require us to customize our products, which could further lengthen the sales process. We spend substantial time, money and other resources in our sales process without any assurance that our efforts will produce any customer orders. These lengthy and uncertain processes also make it difficult for us to forecast demand and timing of customer orders. Moreover, we start manufacturing our products and placing orders for materials and components based on non-binding forecasts that our OEM customers provide to us, further increasing our exposure when actual sales vary from the OEM customer’s forecasts. The difficulty in forecasting demand and the customized nature of our products for certain OEMs make it difficult to anticipate our inventory requirements, which may cause us to over-purchase materials and components or over-produce finished goods, resulting in inventory write-offs, or under-produce finished goods, harming our ability to meet customer requirements and generate sales. Furthermore, due to longer customer product cycles, we may not be able to transition customers to our leading edge products, which would prevent us from benefitting from the technology transitions that enable cost reductions, which may harm our product gross margins. We are continuing the process of transitioning our enterprise solutions products from non-captive memory to captive memory, and delays in the qualification of captive memory for these products may cause unexpected declines in our revenue or margins from these products.

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Difficulty in forecasting demand for our products may result in excess inventory or lost sales, either of which could harm our financial results. The majority of our products are sold directly or indirectly into consumer markets, which are difficult to accurately forecast. Also, a substantial majority of our quarterly sales are from orders received and fulfilled in that quarter. Additionally, we depend upon timely reporting from our customers as to their inventory levels and sales of our products in order to forecast demand for our products. The failure to accurately forecast demand for our products may result in lost sales or excess inventory and associated reserves or write-downs, any of which could harm our business, financial condition and operating results.

The long lead times for some of our purchasing or other arrangements further restrict our ability to respond to variations from our forecasts. Some of our silicon purchasing arrangements provide that the first three months of our rolling six-month projected supply requirements are fixed and we may make only limited percentage changes in the second three months of the period covered by our supply requirement projections. Our products also contain non-silicon components that have long lead-times requiring us to place orders several months in advance of anticipated demand. In addition, purchasing decisions for manufacturing tools in Flash Ventures as well as tools in our captive assembly and test manufacturing facility near Shanghai, China often need to be made several months in advance in order to ensure that the tools can be integrated into the manufacturing process when increased capacity is needed. These purchasing arrangements increase the risk of excess inventory or loss of sales in the event our forecasts vary substantially from actual demand.

We rely substantially on our ventures and strategic partnerships with Toshiba, which subjects us to risks and uncertainties that could harm our business, financial condition and operating results. The vast majority of our NAND flash memory is supplied by Flash Ventures. In addition, we partner with Toshiba on the development of NAND flash technology and we have entered into strategic partnerships with Toshiba relating to research and development for the next technology transitions of NAND flash and alternative technologies beyond NAND flash technologies. These ventures and strategic partnerships are subject to various risks that could harm the value of our investments, our results of operations or our future growth opportunities, including, among others:

• under the terms of our venture agreements with Toshiba, which govern the operations of Flash Ventures, we have limited power to unilaterally direct most of the activities that most significantly impact Flash Ventures’ financial performance, including technology transitions, capital investment and other manufacturing and operational activities at Flash Ventures; the process of reaching agreement with Toshiba may be time consuming and may result in decisions that could harm our future results of operations, financial condition or competitiveness;

• the terms of our arrangements with Toshiba include provisions such as exclusivity, transfer restrictions, and limited termination rights, which limit our flexibility; and

• we may not always agree with Toshiba on the NAND research and development roadmap, or the technology path beyond NAND flash memory, and we or Toshiba may have different priorities with respect to investment in Flash Ventures.

Our license and royalty revenues may fluctuate or decline significantly in the future due to license agreement renewals, declines in sales of the products or use of technology underlying the license and royalty revenues by our licensees, or if licensees fail to perform on a portion or all of their contractual obligations. If our existing licensees do not renew their licenses upon expiration, renew them on less favorable terms, or we are not successful in signing new licensees in the future, our license revenue, profitability, and cash provided by operating activities would be harmed. As our older patents expire, and the coverage of our newer patents may be different, it may be more difficult to negotiate or renew favorable license agreement terms or a license agreement at all. For example, in the first quarter of fiscal year 2010, our license and royalty revenues decreased sequentially primarily due to a new license agreement with Samsung that was effective in the third quarter of fiscal year 2009, and contains a lower effective royalty rate compared to the previous license agreement. To the extent that we are unable to renew license agreements under similar terms, or at all, our financial results would be harmed by the reduced license and royalty revenue and we may incur significant patent litigation costs to enforce our patents against these licensees. Our agreements may require us in certain instances to recognize license revenue related to a particular licensee all in one period instead of over time which could create additional volatility in our licensing revenues. A portion of our license and royalty revenue is based on sales of product categories as well as underlying technology, and fluctuations in the sales of those products or technology adoption rates would also result in fluctuations in the license and royalty revenue due to us under our agreements. If our licensees or we fail to perform on contractual obligations, we may incur costs to enforce or defend the terms of our licenses and there can be no assurance that our enforcement, defense or collection efforts will be effective. If we license new IP from third-parties or existing licensees, we may be required to pay license fees, royalty payments or offset existing license revenues. In addition, we may be subject to disputes, claims or other disagreements on the timing, amount or collection of royalties or license payments under our existing license agreements.

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Future alternative non-volatile storage technologies or other disruptive technologies could make NAND flash memory obsolete or less attractive, and we may not have access to those new technologies on a cost-effective basis, or at all, or new technologies could reduce the demand for flash memory in a variety of applications or devices, any of which could harm our operating results and financial condition. We have a three-pronged strategy towards our investments and efforts in next generation technology scaling and migration: (1) NAND scaling; (2) BiCS technology; and (3) 3D ReRAM technology. The pace at which NAND flash technology is transitioning to new generations is slowing down due to inherent technology limitations. We currently expect to be able to continue to scale our NAND flash technology through two additional generations, but beyond that there is no certainty that further technology scaling can be achieved cost effectively with the current NAND flash technology and architecture. In the first quarter of fiscal year 2011, we began investing in BiCS and other technologies. In BiCS technology, the memory cells are packed along the vertical axis as opposed to the horizontal axis as in the current NAND flash technologies. We believe BiCS technology, if successful, could enable further memory cost reductions beyond the existing NAND roadmap, until 3D ReRAM technology is developed and fully ramped into high-volume production. We also continue to invest in future alternative technologies, particularly our 3D ReRAM technology, which we believe may be a viable alternative to NAND flash technology, when NAND flash technology can no longer scale at a sufficient rate, or at all. However, even when NAND flash technology can no longer be further scaled, we expect NAND flash technology and potential alternative technologies to coexist for an extended period of time. The success of our overall technology strategy is also dependent in part upon the development by third-party suppliers of advanced semiconductor materials and process technologies, such as extreme ultraviolet, or EUV. Our technology development of NAND, BiCS and 3D ReRAM is done in conjunction with Toshiba, and the success of our development could be influenced by whether we are able to agree with Toshiba on a technology path or the timing and amount of investment. There can be no assurance that we will be successful in developing BiCS, 3D ReRAM or other technologies, or that we will be able to achieve the yields, quality or capacities to be cost competitive with existing or other alternative technologies. Furthermore, we cannot guarantee that BiCS, 3D ReRAM or other technologies we develop will be sufficient alternatives for NAND flash memory, will match or exceed all of the performance characteristics of NAND flash technology, or will be well-suited, in a timely manner or at all, for all of the applications in the end markets that NAND flash memory currently addresses or may address in the future. Additionally, BiCS, 3D ReRAM or other technologies may require different capital equipment or manufacturing processes than existing NAND which could impact the cost reduction benefits obtainable through these technologies.

Many companies, including some of our competitors, are attempting to develop alternative non-volatile technologies such as magnetoresistive RAM, or MRAM, ReRAM, Memristor, vertical or stacked NAND, phase-change and charge-trap flash technologies and other technologies. Successful broad-based commercialization of one or more of these technologies could reduce the future revenue and profitability of NAND flash technology and could supplant the potential alternative BiCS or 3D ReRAM technologies that we are developing. In addition, we generate license and royalty revenues from NAND flash technology, and if NAND flash technology is replaced by a technology where our IP is less relevant, our license and royalty revenues would decrease. Also, we may not have access to or we may have to pay royalties to access alternative technologies that we do not develop internally. If our competitors successfully develop new or alternative technologies, and we are unable to scale our technology on an equivalent basis, or if our competitors’ new or alternative technologies satisfy application-specific requirements that our technologies are not able to, we may not be able to compete effectively, and our operating results and financial condition would suffer.

Alternative technologies or storage solutions such as cloud storage, enabled by high bandwidth wireless or internet-based storage, could reduce the need for physical flash storage within electronic devices, which could materially harm our operating results.

We require an adequate level of product gross margins to continue to invest in our business, and our product gross margins may vary significantly depending on a number of factors. Our ability to generate sufficient product gross margins and profitability to invest in our business is influenced by supply and demand balance in the flash memory industry, our ability to reduce our cost per gigabyte at an equal or higher rate than the price decline per gigabyte, our ability to develop new products and technologies, the rate of growth of our target markets, the competitive position of our products, the mix of our products, the continued acceptance of our products by our customers and our management of production capacity. For example, we experienced negative product gross margins for fiscal year 2008 and the first quarter of fiscal year 2009 due to sustained aggressive industry price declines as well as inventory charges primarily due to lower of cost or market write downs. If we fail to maintain adequate product gross margins and profitability, our business and financial condition would be harmed and we may have to reduce, curtail or terminate certain business activities, including funding technology development and capacity expansion. Furthermore, as we diversify the products that we sell, changes in our product mix could result in volatility in our product gross margins, since we have significant variation in our product gross margins across product lines, and some of the products that we sell have product gross margins that are significantly below our overall average. Other factors that could result in volatility in our product gross margins include fluctuations in customer mix, as well as variations in the technologies or form factors of our products.

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Any disruption or shortage in our supply chain could reduce our revenues, earnings and gross margins. All of our flash memory products require silicon supply for the memory and controller components. The vast majority of our flash memory is currently supplied by Flash Ventures and to a much lesser extent by third-party silicon suppliers. Any disruption or shortage in supply of flash memory from our captive or non-captive sources, including disruptions due to disasters, work stoppages, supply chain interruptions and other factors, would harm our operating results.

The concentration of Flash Ventures in Yokkaichi, Japan, magnifies the risks of supply disruption. The Yokkaichi location and Japan in general are subject to earthquakes, typhoons and other natural disasters. Moreover, Toshiba’s employees who produce Flash Ventures’ products are covered by collective bargaining agreements and any strike or other job action by those employees could interrupt our wafer supply from Flash Ventures. A disruption in our captive wafer supply, including but not limited to disruptions from natural disasters, emergencies such as power outages, fires or chemical spills, or employee strikes or other job actions could cause us not to have sufficient supply to meet demand, resulting in lost sales and market share, as well as significant costs, including wafer loss. For example, the March 11, 2011 earthquake and tsunami in Japan caused a brief equipment shutdown at Flash Ventures, which resulted in some wafer loss as well as delayed or canceled deliveries of certain tools and materials from suppliers impacted by the earthquake. In addition, Flash Ventures has, from time to time, experienced power outages and power fluctuations, which have resulted in a loss of wafers and increased costs associated with bringing the facility back online.

Currently, wafers for our internally-designed controllers are manufactured by third-party foundries. In addition, we purchase packaged controllers from third-party sources, and some of our products require other non-flash memory components and materials for which we do not have captive supply, such as the DRAM included in the multi-chip package, or MCP, storage solutions that we supply for use in mobile devices. A disruption in the manufacturing operations of our controller wafer vendors, third-party controller vendors or suppliers of other non-flash memory components, such as DRAM, could result in delivery delays, harm our ability to make timely shipments of our products and harm our operating results until we could qualify an alternate source of supply for these components, which could take several quarters to complete.

Our business depends significantly upon sales through retailers and distributors, and if our retailers and distributors are not successful, we could experience reduced sales, substantial product returns or increased price protection claims, any of which would harm our business, financial condition and operating results. A significant portion of our sales is made through retailers (for our retail channel) and distributors (for both our retail and commercial channels). Except in limited circumstances, we do not have exclusive relationships with our retailers or distributors and, therefore, must rely on them to effectively sell our products. In addition, sales through retailers and distributors typically include commercial terms such as the right to return unsold inventory and protection against price declines. As a result, we do not recognize revenue until after the product has been sold through to the end user, in the case of sales to retailers, or to our distributors’ customers, in the case of sales to distributors. If our retailers and distributors are not successful in selling our products, not only would our revenues decrease, but we could also experience lower gross margins due to substantial product returns or price protection claims. Furthermore, certain of our retailers and distributors are experiencing financial difficulty, and continued negative business or economic conditions could exacerbate liquidity issues for them. Negative changes in the credit-worthiness or the ability to access credit, or the bankruptcy or shutdown of any of our significant retail or distribution partners would harm our revenue and our ability to collect outstanding receivable balances. We also provide inventory on a consigned basis to certain of our retailers, and a bankruptcy or shutdown of these customers could preclude us from taking possession of our consigned inventory, which could result in inventory charges.

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In transitioning to new technologies and products, we may not achieve OEM design wins, our OEM customers may delay transition to new technologies, our competitors may transition more quickly than we do, or we may experience product delays, cost overruns or performance issues that could harm our business. The transition to new generations of products, such as products containing 19-nanometer, 1Y-nanometer or subsequent process technologies and/or X3 NAND memory architecture, is highly complex and requires new controllers, new test procedures and modifications to numerous aspects of our manufacturing processes, resulting in the need for extensive qualification of the new products by our OEM customers and us. In addition, our competitors may transition to these new technologies more quickly or more effectively than we are able to, which could harm our ability to compete effectively. If we fail to achieve OEM design wins with new technologies such as 19‑nanometer, 1Y-nanometer or the use of X3 in certain products, if our OEM customers choose to transition to these new technologies more slowly than our roadmap plans, if the demand for the products that we developed is lower than expected, or if our competitors transition to these new technologies, including X3, more quickly or more effectively than we are able to, we may be unable to achieve the cost structure required to support our profit objectives or may be unable to grow or maintain our OEM market position. Furthermore, there can be no assurance that technology transitions will occur on schedule or at the yields or costs that we anticipate, that the tools and equipment required for the technology transitions will be available on a cost-effective basis or at all, or that products based on the new technologies will meet customer specifications. The vast majority of products require controllers or firmware, and any delays in developing or sourcing controllers or firmware, or incompatibility or quality issues relating to the controllers or firmware in our products, could harm our revenues and gross margins, as well as business relationships with our customers. Any material delay in a development or qualification schedule could delay deliveries and harm our operating results.

We develop new applications, technologies and standards, which may not be widely adopted by consumers or enterprises, or, if adopted, may reduce demand for our older products. We devote significant resources to the development of new applications, products and standards. New applications may require significant upfront investment with no assurance of long-term commercial success or profitability. As we introduce new standards or technologies, it can take time for these new standards or technologies to be adopted, for consumers to accept and transition to these new standards or technologies and for significant sales to be generated, if at all. Failure of consumers or enterprises to adopt our new applications, standards or technologies could harm our results of operations as we fail to reap the benefits of our investments. Competitors or other market participants could seek to develop new standards for flash memory products that, if accepted by device manufacturers or consumers, could reduce demand for our products. If new standards are broadly accepted and we do not adopt these new standards in our products, our revenues and results of operations may be harmed.

We face competition from numerous manufacturers and marketers of products using flash memory and if we cannot compete effectively, our operating results and financial condition will suffer. We face competition from NAND flash memory manufacturers and from companies that buy NAND flash memory and incorporate it into their end products. We face different competitive pressures in different markets, and we compete to varying degrees on the basis of, among other things, price, quality and timely delivery of products, product performance, availability and differentiation, and the development of industry standards and formats. The success of our competitors may harm our future revenues or margins and may result in the loss of our key customers.

• NAND Manufacturers. We compete with NAND flash memory manufacturers, including Hynix Semiconductor, Inc., Intel Corporation, or Intel, Micron Technology, Inc., or Micron, Samsung Electronics Co., Ltd., or Samsung, and Toshiba. These competitors are large companies that may have greater and more advanced wafer manufacturing capacity, substantially greater financial, technical, marketing and other resources, better recognized brand names and more diversified and lower cost businesses than we do, which may allow them to produce flash memory chips in high volumes at low costs and to sell these flash memory chips themselves or to our competitors at a low cost. In addition, many of our competitors have more diversified semiconductor manufacturing capabilities and can internally produce integrated solutions or hybrid products that may include a combination of NAND flash, DRAM, custom ASICs or other integrated products, while our captive manufacturing capability is solely dedicated to NAND flash. These diversified capabilities may also provide these competitors with a competitive advantage not only in product design and manufacturing due to the ability to leverage know-how in DRAM, custom ASICs or other technologies, but also in a greater ability to respond to industry fluctuations due to their ability to convert their DRAM and other semiconductor manufacturing capacity or equipment to NAND flash and vice-versa. Furthermore, some of these competitors manufacture and sell products that are complementary to flash memory products, and may be able to leverage their competencies and customer relationships to gain a competitive advantage. Current and future memory manufacturer competitors could produce alternative flash or other memory technologies that could compete against our NAND flash technology or our alternative technologies, which may reduce demand or accelerate price declines for our products. Furthermore, the future rate of scaling of the NAND flash technology design that we employ may slow down significantly, which would slow down cost reductions that are fundamental to the adoption of NAND flash technology

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in new applications. If our scaling of NAND flash technology slows down relative to our competitors, our business and operating results would be harmed and our investments in captive fabrication facilities could be impaired.

• Flash Memory Card and USB Drive Manufacturers and Resellers. We compete with manufacturers and resellers of flash memory card and USB drives, which purchase or have a captive supply of flash memory components and assemble memory cards. We also sell flash memory in the form of white label cards, wafers or components to certain OEMs who sell flash products that may ultimately compete with our branded products in the retail or commercial channels. The sales volumes and pricing to these OEMs can be highly variable and these OEMs may be more inclined to switch to an alternative supplier based on short-term price fluctuations or the timing of product availability, which could harm our branded market share and reduce our sales and profits.

• Client Storage Solution Manufacturers. In the market for client computing SSDs, we face competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from third-party client SSD solution providers such as Kingston Technology Co., Inc., OCZ Technology Group, Inc., and Philips Lite-On Digital Solutions Corporation, and from hard drive manufacturers such as Seagate Technology PLC, or Seagate, and Western Digital Corporation, or WDC. In this market, we compete with these industry players largely on the basis of performance capabilities, price and product reliability. Many of the large NAND flash producers have established relationships with computer manufacturers, or are computer manufacturers themselves, which gives them a competitive advantage in qualifying and integrating their client storage solutions in this market as well as the ability to leverage competencies that have been developed through these relationships in the past. Hard drive manufacturers may also have a competitive advantage in their ability to leverage their existing relationships and brand recognition with customers, as well as their ability to leverage existing technology in creating hybrid drive products. Our failure to compete effectively against these industry players could harm our business and results of operations.

• Enterprise Storage Solution Manufacturers. In the market for enterprise data center SSDs, we face competition from large NAND flash producers such as Intel, Micron, Samsung and Toshiba, from enterprise SSD solution providers such as Fusion-io, LSI Corporation, SMART Modular Technologies (WWH), Inc. and STEC, Inc., and from hard drive manufacturers such as Seagate and WDC. Many of these competitors have significantly more experience with the software components that are required for successful enterprise SSD solutions, and our failure to continue to develop software expertise could harm our ability to effectively compete in this market. In addition, enterprise data center SSDs is an emerging market, and many established and start-up companies are contributing to the development of this market. Our competitors in this market may be able to leverage existing resources and competencies or acquire or develop other strategic relationships with start-ups before we are able to, and if we are unable to independently develop comparable capabilities, we may be unable to effectively compete.

Our ability to generate revenue or adequate margins for certain products may be limited by our ability to secure, at competitive prices or at all, components or materials required to produce those products. Our products require certain non-flash memory components and materials for which we do not have captive supply. Our ability to generate revenue or adequate margins could be impacted by an inability to source those components or materials in a cost-effective manner, or at all. For example, we supply MCP storage solutions for use in mobile devices. These MCP solutions include both NAND flash memory and DRAM; however, since we do not have a captive supply of DRAM, there could be periods in which we are unable to cost-effectively source the DRAM that we require or to source DRAM in the quantities or on the timeline that we require. In addition, costs of DRAM have increased in the past and continued increases in the future would harm our gross margins for our MCP solution products. If we are unable to source certain components or materials cost effectively, or at all, our revenue and margins may be harmed.

Our financial performance and the value of our investments depends significantly on worldwide economic conditions, which have deteriorated in many countries and regions, and may not recover in the foreseeable future. Demand for our products is harmed by negative macroeconomic factors affecting consumer and enterprise spending. Continuing high unemployment rates, low levels of consumer liquidity, risk of default on sovereign debt and volatility in credit and equity markets have weakened consumer confidence and decreased consumer and enterprise spending in many regions around the world. These and other economic factors may reduce demand for our products and harm our business, financial condition and operating results. In addition, we maintain investments, including our cash, cash equivalents and marketable securities, of various holdings, types and maturities and, given the global nature of our business, our investment portfolio includes both domestic and international investments. Credit ratings and pricing of these investments can be negatively affected by liquidity, credit deterioration, financial results, economic risk, political risk, sovereign risk or other factors, and declines in the credit ratings or pricing of our investments could result in a decline in the value and liquidity of our investments, including our cash, cash equivalents and marketable securities, and result in a significant impairment of our assets.

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Under certain conditions, the Flash Ventures’ master equipment lease obligations could be accelerated, which would harm our business, operating results, cash flows and liquidity. Flash Ventures’ master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, some of the master lease agreements contain an acceleration clause for certain events of default related to us as guarantor, including, among other things, our failure to maintain a minimum stockholders’ equity of at least $1.51 billion, or our failure to maintain a minimum corporate rating of either BB- from S&P or Moody’s Corporation, or Moody’s, or a minimum corporate rating of BB+ from Rating & Investment Information, Inc., or R&I. As of March 31, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of March 31, 2013, our R&I credit rating was BBB, two notches above the required minimum corporate rating threshold for R&I; and our S&P credit rating was BB, one notch above the required minimum corporate rating threshold for S&P.

If our stockholders’ equity were to fall below $1.51 billion or both S&P and R&I were to downgrade our credit rating below the minimum corporate rating threshold, Flash Ventures would become non-compliant with certain covenants under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by us, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration. If an event of default occurs and if we fail to reach a resolution, we may be required to pay a portion or the entire outstanding lease obligations up to approximately $743 million, based upon the exchange rate at March 31, 2013, covered by our guarantee under Flash Ventures’ master lease agreements, which would significantly reduce our cash position and may force us to seek additional financing, which may not be available.

We depend on our captive assembly and test manufacturing facility in China and our business could be harmed if this facility does not perform as planned. Our reliance on our captive assembly and test manufacturing facility near Shanghai, China has increased significantly and we now utilize this factory to satisfy a majority of our assembly and test requirements, to produce products with leading-edge technologies such as multi-stack die packages and to provide order fulfillment. In addition, our Shanghai, China facility is responsible for packaging and shipping our retail products within Asia, Latin America, Canada and Europe. Any delays in adding new equipment capacity, interruptions in production or the ability to ship product, or issues with manufacturing yields at our captive facility could harm our operating results and financial condition. In addition, investment decisions in adding new assembly and test capacity require significant planning and lead-time, and a failure to accurately forecast demand for our products could cause us to over-invest or under-invest in the expansion of captive assembly and test capacity in our facility, which would lead to excess capacity and under-utilization charges, in the event of over-investment, or insufficient assembly and test capacity resulting in a loss of sales and revenue opportunities, in the event of under-investment. Furthermore, if we were to experience labor unrest, or strikes, or if wages were to significantly increase, our ability to produce and ship products could be impaired and we could experience higher labor costs, which could harm our operating results, financial condition and liquidity.

We rely on our suppliers, some of which are the sole source of supply for our non-memory components, and capacity limitations of these suppliers expose our supply chain to unanticipated disruptions or potential additional costs. We do not have long-term supply agreements with many of our suppliers, certain of which are sole sources of supply for our non-memory components. From time-to-time, certain materials may become difficult or more expensive to obtain, including due to capacity constraints of these suppliers, which could impact our ability to meet demand and could harm our profitability. Our business, financial condition and operating results could be significantly harmed by delays or reductions in shipments if we are unable to obtain sufficient quantities of these components or develop alternative sources of supply in a timely manner, on competitive terms, or at all.

We depend on our third-party subcontractors and our business could be harmed if our subcontractors do not perform as planned. We rely on third-party subcontractors for a portion of our wafer testing, chip assembly, product assembly, product testing and order fulfillment. From time-to-time, our subcontractors have experienced difficulty meeting our requirements. If we are unable to increase the amount of capacity allocated to us from our current subcontractors or qualify and engage additional subcontractors, we may not be able to meet demand for our products. We do not have long-term contracts with some of our existing subcontractors, nor do we have exclusive relationships with any of our subcontractors and, therefore, cannot guarantee that they will devote sufficient resources to manufacturing our products. We are not able to directly control product delivery schedules or quality assurance. Furthermore, we manufacture on a turnkey basis with some of our subcontractors. In these arrangements, we do not have visibility and control of their inventories of purchased parts necessary to build our products or of the progress of our products through their assembly line. Any significant problems that occur at our subcontractors, or their failure to perform at the level we expect, could lead to product shortages or quality assurance problems, either of which would harm our operating results.

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Our products may contain errors or defects, which could result in the rejection of our products, product recalls, damage to our reputation, lost revenues, diverted development resources, increased service costs, warranty and indemnification claims and litigation. Our products are complex, must meet stringent user requirements and may contain errors or defects, and the majority of our products provide a warranty period. Errors or defects in our products may be caused by, among other things, errors or defects in the memory or controller components or firmware, including memory and components that we procure from non-captive sources. In addition, the substantial majority of our flash memory is supplied by Flash Ventures, and if the wafers from Flash Ventures contain errors or defects, our overall supply could be harmed. These factors could result in the rejection of our products, damage to our reputation, lost revenues, diverted development resources, increased customer service and support costs, indemnification of our customers’ product recall and other costs, warranty claims and litigation. Generally, our OEM customers have more stringent requirements than other customers and our concentration of revenue from OEMs, especially OEMs who purchase our enterprise and client SSD products, could result in increased expenditures for product testing, or increase our service costs and potentially lead to increased warranty or indemnification claims. Furthermore, the costs of errors or defects in our embedded products may be greater than those of stand-alone, removable products due to the effect that such errors or defects may have on other components of the device in which they are embedded. We record an allowance for warranty and similar costs in connection with sales of our products, but actual warranty and similar costs may be significantly higher than our recorded estimate and harm our operating results and financial condition.

Our new products have, from time-to-time, been introduced with design and production errors at a rate higher than the error rate in our established products. We must estimate warranty and similar costs for new products without historical information and actual costs may significantly exceed our recorded estimates. Underestimation of our warranty and similar costs would harm our operating results and financial condition.

Certain of our products contain encryption or security algorithms to protect third-party content and user-generated data stored on our products. To the extent our products are hacked or the encryption schemes are compromised or breached, this could harm our business by hurting our reputation, requiring us to employ additional resources to fix the errors or defects and expose us to litigation and indemnification claims. This could potentially impact future collaboration with content providers or lead to product returns or claims against us due to actual or perceived vulnerabilities.

We are exposed to foreign currency exchange rate fluctuations that could harm our business, operating results and financial condition. A significant portion of our business is conducted in currencies other than the U.S. dollar, which exposes us to adverse changes in foreign currency exchange rates. An increase in the value of the U.S. dollar could increase the real cost to our customers of our products in those markets outside the U.S. where we sell in dollars, and a weakened U.S. dollar could increase local operating expenses and the cost of raw materials to the extent purchased in foreign currencies. These exposures may change over time as our business and business practices evolve, and they could harm our financial results and cash flows.

Our most significant exposure is related to our purchases of NAND flash memory from Flash Ventures, which are denominated in Japanese yen. Appreciation in the value of the Japanese yen relative to the U.S. dollar would increase our cost of NAND flash wafers, negatively impacting our gross margins and operating results. In addition, our investments in Flash Ventures are denominated in Japanese yen and strengthening of the Japanese yen would increase the cost to us of future funding and increase the value of our yen-denominated investments, increasing our exposure to asset impairments. Macroeconomic weakness in the U.S. or other parts of the world could lead to strengthening of the Japanese yen, which would harm our gross margins, operating results, and the cost of future Flash Venture funding and increase the risk of asset impairment. We also have foreign currency exposures related to certain non-U.S. dollar-denominated revenue and operating expenses in Europe and Asia. Additionally, we have exposures to emerging market currencies, which can be extremely volatile. We also have significant monetary assets and liabilities that are denominated in non-functional currencies.

We enter into foreign exchange forward and cross currency swap contracts to reduce the impact of foreign currency fluctuations on certain foreign currency assets and liabilities. In addition, we hedge certain anticipated foreign currency cash flows with foreign exchange forward and option contracts, primarily for Japanese yen-denominated inventory purchases. We generally have not hedged our future equity investments, distributions and loans denominated in Japanese yen related to Flash Ventures.

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Our attempts to hedge against currency risks may not be successful, which could harm our operating results. In addition, if we do not successfully manage our hedging program in accordance with accounting guidelines, we may be subject to adverse accounting treatment, which could harm our operating results. There can be no assurance that this hedging program will be economically beneficial to us for numerous reasons, including that hedging may reduce volatility, but prevent us from benefiting from a favorable market trend. Further, the ability to enter into foreign exchange contracts with financial institutions is based upon our available credit from such institutions and compliance with covenants and other restrictions. Operating losses, third-party downgrades of our credit rating or instability in the worldwide financial markets, including the downgrade of the credit rating of the U.S. government, could impact our ability to effectively manage our foreign currency exchange rate risk, which could harm our business, operating results and financial condition.

Our global operations and operations at Flash Ventures and third-party subcontractors are subject to risks for which we may not be adequately insured. Our global operations are subject to many risks, including but not limited to errors and omissions, infrastructure disruptions, such as large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. No assurance can be given that we will not incur losses beyond the limits of, or outside the scope of, the coverage of our insurance policies. From time-to-time, various types of insurance have not been available on commercially acceptable terms or, in some cases, at all. There can be no assurance that in the future we will be able to maintain existing insurance coverage or that premiums will not increase substantially. We maintain limited insurance coverage and, in some cases, no coverage at all, for natural disasters and environmental damages, as these types of insurance are sometimes not available or available only at a prohibitive cost. For example, our test and assembly facility in Shanghai, China, on which we significantly rely, may not be adequately insured against all potential losses. Accordingly, we may be subject to uninsured or under-insured losses. We depend upon Toshiba to obtain and maintain sufficient property, business interruption and other insurance for Flash Ventures. If Toshiba fails to do so, we could suffer significant unreimbursable losses, and such failure could also cause Flash Ventures to breach various financing covenants. In addition, we insure against property loss and business interruption resulting from the risks incurred at our third-party subcontractors; however, we have limited control as to how those sub-contractors run their operations and manage their risks, and as a result, we may not be adequately insured.

We and our suppliers rely upon certain rare earth materials that are necessary for the manufacturing of our products, and our business could be harmed if we or our suppliers experience shortages or delays of these rare earth materials. Rare earth materials are critical to the manufacture of some of our products. We and/or our suppliers acquire these materials from a number of countries, including the People’s Republic of China. We cannot predict whether the government of China or any other nation will impose regulations, quotas or embargoes upon the materials incorporated into our products that would restrict the worldwide supply of these materials or increase their cost. If China or any other major supplier were to restrict the supply available to us or our suppliers or increase the cost of the materials used in our products, we could experience a shortage in supply and an increase in production costs, which would harm our operating results.

If our security measures or security measures of our suppliers, vendors and partners are breached and unauthorized access to our or their information technology systems is obtained, we may lose proprietary data.Our security measures and the security measures of our suppliers, vendors and partners may be breached and our or their information technology systems accessed as a result of third-party action, including computer hackers, employee error, malfeasance or otherwise, and result in unauthorized access to our customers’ data or our data, including IP and other confidential business information. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, we may be unable to anticipate these techniques or to implement adequate preventative measures. Furthermore, we have limited or no control over the implementation of preventative measures of our suppliers, vendors and partners. Any security breach could result in disclosure of our trade secrets or confidential customer, supplier or employee data, which could result in legal liability, harm to our reputation and other harm to our business.

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We may need to raise additional financing, which could be difficult to obtain, and which, if not obtained in satisfactory amounts, may prevent us from funding Flash Ventures, developing or enhancing our products, taking advantage of future opportunities, growing our business or responding to competitive pressures or unanticipated industry changes, any of which could harm our business. We currently believe that we have sufficient cash resources to fund our operations as well as our anticipated investments in Flash Ventures for at least the next twelve months; however, we may decide to raise additional funds to maintain the strength of our balance sheet or fund our operations through equity, public or private debt, or lease financings. However, we cannot be certain that we will be able to obtain additional financing on favorable terms, or at all. If we issue additional equity securities, our stockholders will experience dilution and the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. If we raise funds through debt or lease financing, we will have to pay interest and may be subject to restrictive covenants, which could harm our business. If we cannot raise funds on acceptable terms, if and when needed, our credit rating may be downgraded, and we may not be able to develop or enhance our technology or products, fulfill our obligations to Flash Ventures, take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated industry changes, any of which could harm our business.

We may be unable to protect our IP rights, which would harm our business, financial condition and operating results. We rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality procedures and licensing arrangements to protect our IP rights. In the past, we have been involved in significant and expensive disputes regarding our IP rights and those of others, including claims that we may be infringing patents, trademarks and other IP rights of third-parties. We expect that we will be involved in similar disputes in the future.

There can be no assurance that:

• any of our existing patents will continue to be held valid, if challenged;

• patents will be issued for any of our pending applications;

• any claims allowed from existing or pending patents will have sufficient scope or strength to protect us;

• our patents will be issued in the primary countries where our products are sold in order to protect our rights and potential commercial advantage; or

• any of our products or technologies do not infringe on the patents of other companies.

In addition, our competitors may be able to design their products around our patents and other proprietary rights. We also have patent cross-license agreements with several of our leading competitors. Under these agreements, we have enabled competitors to manufacture and sell products that incorporate technology covered by our patents. While we obtain license and royalty revenue or other consideration for these licenses, if we continue to license our patents to our competitors, competition may increase and may harm our business, financial condition and operating results.

There are flash memory producers, flash memory card manufacturers and other companies that utilize flash memory who we believe may infringe our IP. Enforcement of our rights often requires litigation. If we bring a patent infringement action and are not successful, our competitors would be able to use similar technology to compete with us. Moreover, the defendant in such an action may successfully countersue us for infringement of their patents or assert a counterclaim that our patents are invalid or unenforceable. If we do not prevail in the defense of patent infringement claims, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products in one or more geographic locations, expend significant resources to develop non-infringing technology, discontinue the use of specific processes or obtain licenses to the technology infringed. If we are enjoined from selling our products, or if we are required to develop new technologies or pay significant monetary damages or are required to make substantial royalty payments, our business and results of operations would be harmed.

We and certain of our officers are at times involved in litigation, including litigation regarding our IP rights or that of third parties, which may be costly, may divert the efforts of our key personnel and could result in adverse court rulings, which could materially harm our business. We are often involved in litigation, including cases involving our IP rights and those of others. We are the plaintiff in some of these actions and the defendant in others. Some of the actions seek injunctions against the sale of our products and/or substantial monetary damages, which if granted or awarded, could materially harm our business, financial condition and operating results.

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Litigation is subject to inherent risks and uncertainties that may cause actual results to differ materially from our expectations. Factors that could cause litigation results to differ include, but are not limited to, the discovery of previously unknown facts, changes in the law or in the interpretation of laws, and uncertainties associated with the judicial decision-making process. If we receive an adverse judgment in any litigation, we could be required to pay substantial damages and/or cease the manufacture, use and sale of products. Litigation, including IP litigation, can be complex, can extend for a protracted period of time, can be very expensive, and the expense can be unpredictable. Litigation initiated by us could also result in counter-claims against us, which could increase the costs associated with the litigation and result in our payment of damages or other judgments against us. In addition, litigation may divert the efforts and attention of some of our key personnel.

We may be obligated to indemnify our current or former directors or employees, or former directors or employees of companies that we have acquired, in connection with litigation or regulatory investigations. These liabilities could be substantial and may include, among other things, the costs of defending lawsuits against these individuals; the cost of defending shareholder derivative suits; the cost of governmental, law enforcement or regulatory investigations; civil or criminal fines and penalties; legal and other expenses; and expenses associated with the remedial measures, if any, which may be imposed.

Moreover, from time-to-time, we agree to indemnify certain of our suppliers and customers for alleged patent infringement. The scope of such indemnity varies but generally includes indemnification for direct and consequential damages and expenses, including attorneys’ fees. We may be engaged in litigation as a result of these indemnification obligations. Third-party claims for patent infringement are excluded from coverage under our insurance policies. A future obligation to indemnify our customers or suppliers may harm our business, financial condition and operating results. For additional information concerning legal proceedings, see Part II, Item 1, “Legal Proceedings.”

We may be unable to license, or license at a reasonable cost, IP from third parties as needed, which could expose us to liability for damages, increase our costs or limit or prohibit us from selling products. If we incorporate third-party technology into our products or if we are found to infringe the IP of others, we could be required to license IP from third-parties. We may also need to license some of our IP to others in order to enable us to obtain important cross-licenses to third-party patents. We cannot be certain that licenses will be offered when we need them, that the terms offered will be acceptable, or that these licenses will help our business. If we do obtain licenses from third parties, we may be required to pay license fees, royalty payments, or offset license revenues. In addition, if we are unable to obtain a license that is necessary to manufacture or sell our products, we could be required to redesign or stop shipping our products to one or more geographic locations, suspend the manufacture of products or stop our product suppliers from using processes that may infringe the rights of third parties. We may not be successful in redesigning our products, or the necessary licenses may not be available under reasonable terms, which would harm our business and financial results.

Changes in the seasonality of our business may result in our inability to accurately forecast our product purchase requirements. Sales of our products in the consumer electronics market are subject to seasonality. Sales have typically increased significantly in the fourth quarter of each fiscal year, sometimes followed by significant declines in the first quarter of the following fiscal year. However, the current global economic environment may impact typical seasonal trends, making it more difficult for us to forecast our business. Changes in the product or channel mix of our business can also impact seasonal patterns, adding to complexity in forecasting demand. If our forecasts are inaccurate, we may lose market share or procure excess inventory or inappropriately increase or decrease our operating expenses, any of which could harm our business, financial condition and operating results. Changes in seasonality may also lead to greater volatility in our stock price and the need for significant working capital investments in receivables and inventory, including the need to build inventory levels in advance of our projected high volume selling seasons.

We are vulnerable to numerous risks related to our international operations, including political instability, and we must comply with numerous laws and regulations, many of which are complex. Currently, a large portion of our revenues are derived from our international operations, and all of our products and many of our components are produced overseas in China, Japan and Taiwan. Our revenue and future growth is also significantly dependent on international markets, and we may face difficulties entering or maintaining sales in some international markets. We are, therefore, affected by the political, economic, labor, environmental, public health and military conditions in these countries. For example, China does not currently have a comprehensive and highly developed legal system, particularly with respect to the protection of IP rights, which results in the prevalence of counterfeit goods in China, among other things, as well as piracy and degradation of our IP protection. Our efforts to prevent counterfeit products from entering the market may not be successful, and the sale of counterfeit products could harm our operating results and financial condition. In addition, customs regulations in China are complex and subject to frequent changes and, in the event of a customs compliance issue, our ability to import to, and export from, our factory in Shanghai, China could be adversely affected, which could harm our operating results and financial condition.

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Our international business activities could also be limited or disrupted by any of the following factors:

• the need to comply with foreign government regulation;

• the need to comply with U.S. regulations on international business, including the Foreign Corrupt Practices Act and rules regarding conflict minerals;

• changes in diplomatic and trade relationships or government intervention, which may impact our ability to sell to certain customers;

• reduced sales to our customers or interruption to our manufacturing processes in the Pacific Rim that may arise from regional issues in Asia, including natural disasters or labor strikes;

• imposition of regulatory requirements, tariffs, import and export restrictions and other barriers and restrictions;

• a higher degree of commodity pricing than in the U.S.;

• changes in, or the particular application of, government regulations;

• import or export restrictions that could affect some of our products, including those with encryption technology;

• duties and/or fees related to customs entries for our products, which are all manufactured offshore;

• longer payment cycles and greater difficulty in accounts receivable collection;

• adverse tax rules and regulations;

• weak protection of our IP rights;

• delays in product shipments due to local customs restrictions; and

• delays in research and development that may arise from political unrest at our development centers in Israel or other countries.

Our common stock and convertible notes prices have been, and may continue to be, volatile, which could result in investors losing all or part of their investments.The market prices of our common stock and convertible notes have fluctuated significantly in the past and may continue to fluctuate in the future. We believe that such fluctuations will continue as a result of many factors, such as financing plans, future announcements concerning us, our competitors or our principal customers regarding financial results or expectations, technological innovations, industry supply and demand dynamics, new product introductions, governmental regulations, the commencement or results of litigation or changes in earnings estimates by analysts. In addition, in recent years the stock market has experienced significant price and volume fluctuations and the market prices of the securities of high-technology and semiconductor companies have been especially volatile, often for reasons outside the control of the particular companies. These fluctuations as well as general economic, political and market conditions may harm the market price of our common stock as well as the prices of our outstanding convertible notes.

We may not be able to realize the potential financial or strategic benefits of business acquisitions or strategic investments, which could harm our ability to grow our business, develop new products or sell our products. We have in the past and may in the future enter into acquisitions of, or investments in, businesses, in order to complement or expand our current businesses or enter into new markets. Mergers and acquisitions of high-technology companies are inherently risky and subject to many factors outside of our control and no assurance can be given that our previous or future acquisitions will be successful, will deliver the intended benefits, and will not materially harm our business, operating results or financial condition. Furthermore, negotiation and integration of acquisitions or strategic investments could divert management’s attention and other company resources.

Factors associated with past or future acquisitions or investments that could harm our growth prospects or results of operations include:

• difficulty in integrating the technology, products, operations or workforce of the acquired business into our business;

• difficulty in entering into new markets in which we have limited or no experience, such as software solutions, and where competitors have stronger positions;

• loss of, or impairment of relationships with, our key employees, vendors or customers;

• difficulty in operating in new and potentially disperse locations;

• disruption of our ongoing businesses or the ongoing business of the company we invest in or acquire;

• failure to realize the potential financial or strategic benefits of the transaction;

• difficulty integrating the accounting, management information, human resources and other administrative systems of the acquired business;

• disruption of or delays in ongoing research and development efforts and release of new products to market;

• diversion of capital and other resources;

• assumption of liabilities;

• issuance of equity securities that may be dilutive to our existing stockholders;

• diversion of resources and unanticipated expenses resulting from litigation arising from potential or actual business acquisitions or investments;

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• failure of the due diligence processes to identify significant issues with product quality, technology and development, or legal and financial issues, among other things;

• incurring non-recurring charges, increased contingent liabilities, adverse tax consequences, depreciation or deferred compensation charges, amortization or impairment of intangible assets or impairment of goodwill, which could harm our results of operations; and

• potential delay in customer purchasing decisions due to uncertainty about the direction of our product offerings or those of the acquired business.

Our success depends on our key personnel, including our senior management, and the loss of key personnel or the transition of key personnel could disrupt our business. Our success greatly depends on the continued contributions of our senior management and other key research and development, sales, marketing and operations personnel. We do not have employment agreements with any of our executive officers and they are free to terminate their employment with us at any time. Our success will depend on our ability to recruit and retain additional highly-skilled personnel. We have relied on equity awards in the form of stock options and restricted stock units as one means for recruiting and retaining highly skilled talent and a reduction in our stock price may reduce the effectiveness of these equity awards in retaining employees. We also rely on cash incentive awards to motivate and retain employees. These cash incentive awards depend significantly on our financial and business performance, and variations in our financial and business performance from our expectations at the time we set the targets for such cash incentive awards could result in decreased or eliminated awards, reducing the effectiveness of these cash incentive awards in retaining employees.

Terrorist attacks, war, threats of war and government responses thereto may negatively impact our operations, revenues, costs and stock price. Terrorist attacks, U.S. military responses to these attacks, war, threats of war and any corresponding decline in consumer confidence could have a negative impact on consumer demand. Any of these events may disrupt our operations or those of our customers and suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers. Any of these events could also increase volatility in the U.S. and world financial markets, which could harm our stock price and may limit the capital resources available to us and our customers or suppliers, or adversely affect consumer confidence. We have substantial operations in Israel including a development center in Northern Israel, near the border with Lebanon, and a research center in Omer, Israel, which is near the Gaza Strip, areas that have experienced significant violence and political unrest. Turmoil and unrest in Israel, the Middle East or other regions could cause delays in the development or production of our products and could harm our business and operating results.

Natural disasters or epidemics in the countries in which we or our suppliers or subcontractors operate could harm our operations. Our supply chain operations, including those of our suppliers and subcontractors, are concentrated in the United States, Japan, Taiwan, China and Singapore. In the past, certain of these areas have been affected by natural disasters such as earthquakes, tsunamis, floods and typhoons, and some areas have been affected by epidemics. In addition, our headquarters, which house a significant concentration of our research and development and engineering staff, are located in the San Francisco Bay Area, an area that is prone to earthquakes. If a natural disaster or epidemic were to occur in one or more of these areas, we could incur a significant work or production stoppage. The impact of these potential events is magnified by the fact that we do not have insurance for most natural disasters or epidemics, including earthquakes and tsunamis. The impact of a natural disaster or epidemic could harm our business and operating results.

Disruptions in global transportation could impair our ability to deliver or receive product on a timely basis, or at all, causing harm to our financial results. Our raw materials, work-in-process and finished products are primarily distributed via air transport. If there are significant disruptions in air transport, we may not be able to deliver our products or receive raw materials. Any natural disaster or other event that affects air transport in Asia could disrupt our ability to receive raw materials in, or ship finished product from, our Shanghai, China facility or our Asia-based contract manufacturers. As a result, our business and operating results may be harmed.

We rely on information systems to run our business and any prolonged down time could harm our business operations and/or financial results. We rely on an enterprise resource planning system, as well as multiple other systems, databases, and data centers to operate and manage our business. Any information system problems, programming errors or unanticipated system or data center interruptions could impact our continued ability to successfully operate our business and could harm our financial results or our ability to accurately report our financial results on a timely basis.

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Anti-takeover provisions in our charter documents, stockholder rights plan and Delaware law could discourage or delay a change in control and negatively impact our stockholders. We have taken a number of actions that could have the effect of discouraging a takeover attempt. For example, we have a stockholders’ rights plan that would cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder, who attempts to acquire us on terms not approved by our board of directors. This could discourage an acquisition of us. In addition, our certificate of incorporation grants our board of directors the authority to fix the rights, preferences and privileges of and issue up to 4,000,000 shares of preferred stock without stockholder action (2,000,000 shares of preferred stock have already been reserved under our stockholder rights plan). Issuing preferred stock could have the effect of making it more difficult and less attractive for a third party to acquire a majority of our outstanding voting stock. Preferred stock may also have other rights, including economic rights senior to our common stock that could harm the market value of our common stock. In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law. This section provides that a corporation may not engage in any business combination with any interested stockholder, defined broadly as a beneficial owner of 15% or more of that corporation’s voting stock, during the three-year period following the time that a stockholder became an interested stockholder. This provision could delay or discourage a change of control of SanDisk.

Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our profitability. We are subject to income and other taxes in the U.S. and numerous foreign jurisdictions. Our tax liabilities are affected by the amounts we charge for inventory, services, licenses, funding and other items in intercompany transactions. We are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with our intercompany charges or other matters and assess additional taxes. For example, we were under a federal income tax audit by the U.S. Internal Revenue Service, or IRS, for fiscal years 2005 through 2008 and received the Revenue Agent’s report in February 2012. The most significant proposed adjustments are comprised of related party transactions between our U.S. parent company and our foreign subsidiaries. We are contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached. Furthermore, we are currently under a federal income tax audit by the IRS for fiscal years 2009 through 2011. While we regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision, tax audits are inherently uncertain and an unfavorable outcome could occur. An unanticipated unfavorable outcome in any specific period could harm our operating results for that period or future periods. The financial cost and management attention and time devoted to defending income tax positions may divert resources from our business operations, which could harm our business and profitability. IRS audits may also impact the timing and/or amount of our refund claims. In addition, our effective tax rate in the future could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return preparation process. In particular, the carrying value of deferred tax assets, which are predominantly in the U.S., is dependent on our ability to generate future taxable income in the U.S.

We may be subject to risks associated with laws, regulations and customer initiatives relating to the environment or other social responsibility issues. Production and marketing of products in certain states and countries may subject us to environmental and other regulations including, in some instances, the responsibility for environmentally safe disposal or recycling. Such laws and regulations have recently been passed in several jurisdictions in which we operate, including Japan and certain states within the U.S. In addition, climate change issues, energy usage and emissions controls may result in new environmental legislation and regulations, at the international, federal or state level, that may make it more difficult or expensive for us, our suppliers and our customers to conduct business. Any of these regulations could cause us to incur additional direct costs, as well as increased indirect costs related to our relationships with our customers and suppliers, and otherwise harm our operations and financial condition.

Government regulators or our customers may require us to comply with product or manufacturing standards that are more restrictive than current laws and regulations related to environmental matters, conflict minerals or other social responsibility initiatives. The implementation of these standards could affect the sourcing, cost and availability of materials used in the manufacture of our products. Non-compliance with these standards could cause us to lose sales to these customers and compliance with these standards could increase our costs, which may harm our operating results.

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New conflict minerals regulations may cause us to incur additional expenses and could limit the supply and increase the cost of certain metals used in manufacturing our products.In August 2012, the SEC adopted new rules establishing additional disclosure and reporting requirements regarding the use of specified minerals, or conflict minerals, that are necessary to the functionality or production of products manufactured or contracted to be manufactured. These new rules will require us to determine, disclose and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or any adjoining country. These new rules could affect our ability to source certain materials used in our products at competitive prices and could impact the availability of certain minerals used in the manufacture of our products, including gold, tantalum, tin and tungsten. As there may be only a limited number of suppliers of “conflict free” minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Our customers, including OEM and other customers in our commercial channel, may require that our products be free of conflict minerals, and our revenues and margins may be harmed if we are unable to provide assurances to our customers that our products are “conflict free” or to procure conflict free minerals at a reasonable price, or at all, or are unable to pass through any increased costs associated with meeting these demands. Additionally, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. We expect that there may be material costs associated with complying with the disclosure requirements, such as costs related to determining the source of certain minerals used in our products, as well as costs related to possible changes to products, processes, or sources of supply as a consequence of such verification and disclosure requirements.

In the event we are unable to satisfy regulatory requirements relating to internal controls, or if our internal control over financial reporting is not effective, our business could suffer. In connection with our certification process under Section 404 of the Sarbanes-Oxley Act, we have identified in the past and will, from time-to-time in the future, identify deficiencies in our internal control over financial reporting. There can be no assurance that individually or in the aggregate these deficiencies would not be deemed to be a material weakness or significant deficiency. A material weakness or significant deficiency in internal control over financial reporting could have a materially adverse impact on our reported financial results and the market price of our stock could significantly decline. Additionally, adverse publicity related to the disclosure of a material weakness in internal controls could harm our reputation, business and stock price. Any internal control or procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving desired control objectives and cannot prevent human error, intentional misconduct or fraud.

We have significant financial obligations related to Flash Ventures, which could impact our ability to comply with our obligations under our 1% Convertible Senior Notes due 2013 and 1.5% Convertible Senior Notes due 2017. We have entered into agreements to guarantee or provide financial support with respect to lease and certain other obligations of Flash Ventures in which we have a 49.9% ownership interest. As of March 31, 2013, we had guarantee obligations for Flash Ventures’ master lease agreements denominated in Japanese yen of approximately $743 million based on the exchange rate at March 31, 2013. In addition, we have significant commitments for the future fixed costs of Flash Ventures, and we will incur significant obligations with respect to Flash Forward as well as continued investment in Flash Partners and Flash Alliance. Due to these and our other commitments, we may not have sufficient funds to make payments under or repay the notes.

The net share settlement feature of the 1% Convertible Senior Notes due 2013 and 1.5% Convertible Senior Notes due 2017 may have adverse consequences for us or our noteholders. The 1% Convertible Senior Notes due 2013, or 1% Notes due 2013, and 1.5% Convertible Senior Notes due 2017, or 1.5% Notes due 2017, are subject to net share settlement, which means that we will satisfy our conversion obligation to holders by paying cash in settlement of the lesser of the principal amount and the conversion value of the 1% Notes due 2013 and 1.5% Notes due 2017 and by delivering shares of our common stock in settlement of any and all conversion obligations in excess of the principal amount. Accordingly, upon conversion of a note, holders might not receive any shares of our common stock.

Our failure to convert the 1% Notes due 2013 and 1.5% Notes due 2017 into cash or a combination of cash and common stock upon exercise of a holder’s conversion right in accordance with the provisions of the applicable indenture would constitute a default under that indenture. We may not have the financial resources or be able to arrange for financing to pay such principal amount in connection with the surrender for conversion of the 1% Notes due 2013, which are due in May 2013, and the 1.5% Notes due 2017. While we do not currently have any debt or other agreements that would restrict our ability to pay the principal amount of any convertible notes in cash, we may enter into such an agreement in the future, which may limit or prohibit our ability to make any such payment. In addition, a default under either indenture could lead to a default under existing and future agreements governing our indebtedness. If, due to a default, the repayment of related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay such indebtedness and amounts owing in respect of the conversion of any convertible notes.

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The convertible note hedge transactions and warrant transactions and/or early termination of the convertible note hedge and warrant transactions may affect the value of the notes and our common stock. In connection with the pricing of the 1% Notes due 2013 and 1.5% Notes due 2017, we have entered into privately negotiated convertible note hedge transactions with the underwriters in the offerings of the notes (collectively, the “dealers”) or their affiliates. The convertible note hedge transactions cover, subject to customary anti-dilution adjustments, the number of shares of our common stock that initially underlie the 1% Notes due 2013 and the 1.5% Notes due 2017. These transactions are expected to reduce the potential dilution with respect to our common stock upon conversion of the 1% Notes due 2013 and 1.5% Notes due 2017. However, if there is a counterparty default or other nonperformance under the hedge transactions, we may not be able to reduce the potential dilution with respect to our common stock upon conversion of our 1% Notes due 2013 and 1.5% Notes due 2017, or we may not be refunded our initial costs associated with such hedge transactions. Separately, we have also entered into privately negotiated warrant transactions with the dealers or their affiliates, relating to the same number of shares of our common stock, subject to customary anti-dilution adjustments.

The 1% Notes due 2013 and the 1.5% Notes due 2017 have a conversion feature with a strike price of $82.36 and $52.37, respectively. If our weighted average stock price goes above the strike price of either the 1% Notes due 2013 and/or the 1.5% Notes due 2017 during any of our reporting periods, we will be required to include additional shares in our diluted earnings per share calculation, which will result in a decrease in our reported earnings per share. While we have entered into convertible note hedge transactions which will effectively increase the strike price from an economic standpoint and reduce the potential dilution upon conversion, the impact of the convertible note hedge transactions will not be reflected in our reported diluted earnings per share.

In addition, we may, from time-to-time, repurchase a portion of the 1% Notes due 2013 or the 1.5% Notes due 2017. In connection with any such repurchases, we may early terminate a portion of the convertible note hedge transactions we entered into with respect to the 1% Notes due 2013 or the 1.5% Notes due 2017 that we repurchase, and a portion of the warrant transactions we entered into at the time of the offerings of those notes. In connection with any such termination of a portion of the hedge and warrant transactions, the counterparties to those transactions are expected to unwind various over-the-counter derivatives and/or sell our common stock in open market and/or privately negotiated transactions, which could harm the market price of our common stock and the notes.

In connection with the convertible note hedge and warrant transactions, the dealers or their respective affiliates:

• have entered into various over-the-counter cash-settled derivative transactions with respect to our common stock concurrently with, or shortly following, the pricing of the notes; and

• may enter into, or may unwind, various over-the-counter cash-settled derivative transactions and/or purchase or sell shares of our common stock in open market and/or privately negotiated transactions following the pricing of the notes, including during any observation period related to a conversion of notes.

The dealers or their respective affiliates are likely to modify their hedge positions, from time-to-time, prior to conversion or maturity of the notes by purchasing and selling shares of our common stock, other of our securities or other instruments they may wish to use in connection with such hedging. In particular, such hedging modification may occur during any observation period for a conversion of the 1% Notes due 2013 and 1.5% Notes due 2017, which may have a negative effect on the value of the consideration received in relation to the conversion of those notes. In addition, we intend to exercise options we hold under the convertible note hedge transactions whenever notes are converted. To unwind their hedge positions with respect to those exercised options, the dealers or their respective affiliates expect to purchase or sell shares of our common stock in open market and/or privately negotiated transactions and/or enter into or unwind various over-the-counter derivative transactions with respect to our common stock during the observation period, if any, for the converted notes.

The effect, if any, of any of these transactions and activities on the market price of our common stock or the 1% Notes due 2013 and 1.5% Notes due 2017 will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the value of our common stock and the value of the 1% Notes due 2013 and 1.5% Notes due 2017, and as a result, the amount of cash and the number of shares of common stock, if any, the holders will receive upon the conversion of the notes.

67

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities. The table below summarizes information about our purchases of equity securities registered pursuant to Section 12 of the Exchange Act during the three fiscal months ended March 31, 2013.

Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(2)
December 31, 2012 to January 27, 2013	113,000		$46.00	113,000	$	1,010,766,409
January 28, 2013 to February 24, 2013	415,840	50.24		415,840	989,874,607
February 25, 2013 to March 31, 2013	1,229,106	51.67		1,229,106	926,366,700
Total	1,757,946	50.97		1,757,946

————

(1) Our Board of Directors has authorized up to $1.25 billion for stock repurchases in the open market or otherwise. This purchase plan will expire on October 26, 2016.

(2) Does not include amounts paid for commissions.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The information required by this item is set forth on the exhibit index which follows the signature page of this report.

68

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, thereunto duly authorized.

		SANDISK CORPORATION
		(Registrant)
Dated:	May 3, 2013	By:	/s/ Judy Bruner
			Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)

S - 1

EXHIBIT INDEX

		Incorporated by Reference
Exhibit Number	Exhibit Title	Form	File No.	Exhibit No.	Filing Date	Provided Herewith
3.1	Restated Certificate of Incorporation of the Registrant.	S-1	33-96298	3.2	8/29/1995
3.2	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant dated December9, 1999.	10-Q	000-26734	3.1	8/16/2000
3.3	Certificate of Amendment of the Restated Certificate of Incorporation of the Registrant dated May11, 2000.	S-3	333-85686	4.3	4/5/2002
3.4	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant dated May26, 2006.	8-K	000-26734	3.1	6/1/2006
3.5	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant dated May27, 2009.	8-K	000-26734	3.1	5/28/2009
3.6	Certificate of Designations for the Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on April 24, 1997.	8-K/A	000-26734	3.5	5/16/1997
3.7	Certificate of Amendment to the Certificate of Designations of Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on September24, 2003.	8-A	000-26734	3.2	9/25/2003
3.8	Amended and Restated Bylaws of the Registrant dated December20, 2012.	8-K	000-26734	3.1	12/20/2012
4.1	Rights Agreement, dated as of September15, 2003, by and between the Registrant and Computershare Trust Company, Inc.	8-A	000-26734	4.2	9/25/2003
4.2	Amendment No. 1 to Rights Agreement, dated as of November6, 2006, by and between the Registrant and Computershare Trust Company, Inc.	8-A/A	000-26734	4.2	11/8/2006
4.3	Indenture (including form of Notes) with respect to the Registrant’s 1.0% Convertible Senior Notes due 2013, dated as of May 15, 2006, by and between the Registrant and The Bank of New York.	8-K	000-26734	4.1	5/15/2006
4.4	Indenture (including form of Notes) with respect to the Registrant’s 1.5% Convertible Senior Notes due 2017, dated as of August 25, 2010, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A.	8-K	000-26734	4.1	8/25/2010
12.1	Computation of ratio of earnings to fixed charges.					X
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.					X
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*					X
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*					X
101.INS	XBRL Instance Document.**					X
101.SCH	XBRL Taxonomy Extension Schema Document.**					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.**					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.**					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.**					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.**					X

————

* Furnished herewith.

** Pursuant to Rule 406T of Regulation S-T, the XBRL files hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

E - 1

EX-12.1

EXHIBIT 12.1

Computation of Ratio of Earnings to Fixed Charges

	Three months ended March 31, 2013			Fiscal years ended
				December 30, 2012			January 1, 2012			January 2, 2011			January 3, 2010			December 28, 2008
	(In thousands, except ratios)
Computation of earnings:
Income (loss) before provision for income taxes	$	233,894		$	626,916		$	1,476,754		$	1,457,433		$	503,801		$	(1,952,374	)
Fixed charges excluding capitalized interest	31,587			128,934			125,057			101,434			81,630			67,821
Distributed earnings from 50%-or-less-owned affiliates	(7,834		)	(451		)	(2,729		)	(147		)	(392		)	(3,604		)
Adjusted earnings	$	257,647		$	755,399		$	1,599,082		$	1,558,720		$	585,039		$	(1,888,157	)
Computation of fixed charges:
Interest expense	$	31,021		$	119,869		$	122,512		$	90,377		$	70,205		$	65,207
Interest relating to lease guarantee of 50%-or-less-owned affiliates	—			7,065			—			8,746			8,898			—
Interest portion of operating lease expense	566			2,000			2,545			2,311			2,527			2,614
Fixed charges	$	31,587		$	128,934		$	125,057		$	101,434		$	81,630		$	67,821
Ratio of earnings to fixed charges (1)	8.2		x	5.9		x	12.8		x	15.4		x	7.2		x	—

————

⁽¹⁾  Computed by dividing (i) income (loss) before provision for income taxes adjusted for fixed charges by (ii) fixed charges which include interest expense plus amortization of debt issuance costs, the portion of rent expense under operating leases deemed to be representative of the interest factor and interest relating to lease guarantees of 50%-or-less-owned affiliates.  In fiscal year 2008, earnings were insufficient to cover fixed charges by $1.96 billion.

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Sanjay Mehrotra, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedMarch 31, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 3, 2013	/s/ Sanjay Mehrotra
		Sanjay Mehrotra President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Judy Bruner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedMarch 31, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 3, 2013	/s/ Judy Bruner
		Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Sanjay Mehrotra, Chief Executive Officer of SanDisk Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedMarch 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SanDisk Corporation.

By:	/s/ Sanjay Mehrotra
	Sanjay Mehrotra President and Chief Executive Officer (Principal Executive Officer)
	May 3, 2013

A signed original of this written statement required by Section 906 has been provided to SanDisk Corporation and will be retained by SanDisk Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Judy Bruner, Chief Financial Officer of SanDisk Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the quarterly report on Form 10-Q of SanDisk Corporation for the quarter endedMarch 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of SanDisk Corporation.

By:	/s/ Judy Bruner
	Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer)
	May 3, 2013

A signed original of this written statement required by Section 906 has been provided to SanDisk Corporation and will be retained by SanDisk Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Investments and Fair Value Measurements-Debt Instrument FV (Details 8) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Related costs and the fair values based on quoted market prices
Convertible Debt	$ 1,720,635	$ 1,696,621
Convertible Debt [Member]
Related costs and the fair values based on quoted market prices
Convertible Debt	1,720,635	1,696,621
Fair Value	2,213,819	2,087,190
1% Sr. Convertible Notes due 2013 [Member]
Related costs and the fair values based on quoted market prices
Convertible Debt	921,007	906,708
Fair Value	927,319	927,820
1.5% Sr. Convertible Notes due 2017 [Member]
Related costs and the fair values based on quoted market prices
Convertible Debt	799,628	789,913
Fair Value	$ 1,286,500	$ 1,159,370

XML

Balance Sheet Information (Details Textuals) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 30, 2012
Balance Sheet Information
Financing Receivable, Recorded Investment, Past Due	$ 0		$ 0
Provision for Loan and Lease Losses	$ 0	$ 0
Weighted Average Warranty For Companys Products	3 years
Maximum Warranty For Companys Products	10 years

XML

Balance Sheet Information-Other Assets (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Other Current Assets
Tax-related receivables	$ 177,942	$ 186,223
Other non-trade receivable	35,130	0
Prepayment to Flash Forward Ltd.	20,577	20,577
Derivative contract receivables	14,937	19,064
Prepaid expenses	11,835	13,221
Other current assets	12,336	21,794
Total other current assets	272,757	260,879
Other Assets, Noncurrent
Prepaid tax on intercompany transactions	41,025	42,118
Prepayment to Flash Forward Ltd.	0	5,144
Convertible note issuance costs	8,237	8,708
Long-term prepaid income tax	63,008	63,008
Other non-current assets	35,898	34,832
Total other non-current assets	$ 148,168	$ 153,810

XML

Income Taxes Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Income Tax Contingency
Provision for income taxes	$ 67,665	$ 52,163
Effective tax rate	28.90%	31.30%

XML

Goodwill and Intangible Assets-Goodwill (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Goodwill and Intangible Assets
Goodwill, Beginning Balance	$ 201,735
Goodwill, Purchase Accounting Adjustments	601
Goodwill, Ending Balance	$ 202,336

XML

Commitments, Contingencies and Guarantees-Rent Expense (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Net rent expense
Rent expense, net	$ 1,843	$ 1,113

XML

Balance Sheet Information-Receivables (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Accounts Receivable, net
Accounts receivable from product revenues	$ 584,698	$ 766,583
Accounts receivable from license and royalty revenues	0	37,638
Allowance for doubtful accounts	(6,377)	(6,627)
Price protection, promotions and other activities	(138,825)	(171,569)
Accounts receivable, net	$ 439,496	$ 626,025

XML

Investments and Fair Value Measurements-Fin Assets and Liabilities 1 (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Financial assets measured at fair value on a recurring basis
Total financial assets	$ 5,995,327	$ 5,548,126
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	34,821	13,584
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	860,953	610,129
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0	0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	5,134,374	4,937,997
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	34,821	13,584
Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	0	0
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0	0
Derivative Liabilities [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	34,821	13,584
Derivative Liabilities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	0	0
Derivative Liabilities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	34,821	13,584
Derivative Liabilities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Liabilities measured at fair value on a recurring basis
Derivative liabilities	0	0
Money Market Funds [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	795,213	582,743
Money Market Funds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	795,213	582,743
Money Market Funds [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	0	0
Money Market Funds [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Money market funds	0	0
Fixed Income Securities [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	5,185,177	4,945,325
Fixed Income Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	65,740	27,386
Fixed Income Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	5,119,437	4,917,939
Fixed Income Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Fixed income securities	0	0
Derivative Assets [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	14,937	20,058
Derivative Assets [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	0	0
Derivative Assets [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	14,937	20,058
Derivative Assets [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Derivative assets	$ 0	$ 0

XML

Commitments, Contingencies and Guarantees-JV (Details Textual 1)	3 Months Ended		3 Months Ended				3 Months Ended				3 Months Ended								3 Months Ended
	Mar. 31, 2013 USD ($)	Dec. 30, 2012 USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] USD ($)	Apr. 01, 2012 Flash Partners Ltd [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Partners Ltd [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] USD ($)	Apr. 01, 2012 Flash Alliance Ltd [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Alliance Ltd [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] JPY (¥)	Dec. 30, 2012 Flash Forward Ltd [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] SanDisk Corporation [Member]	Mar. 31, 2013 Flash Ventures [Member] USD ($)		Mar. 31, 2013 Flash Ventures [Member] JPY (¥)	Dec. 30, 2012 Flash Ventures [Member] USD ($)	Mar. 31, 2013 Flash Ventures [Member] Standard and Poor [Member]	Mar. 31, 2013 Flash Ventures [Member] Moody's [Member]	Mar. 31, 2013 Flash Ventures [Member] Rating and Investment Information [Member]	Mar. 31, 2013 Flash Ventures [Member] SanDisk Corporation [Member]	Mar. 31, 2013 Flash Ventures [Member] Toshiba Corporation [Member]
Venture Ownership
Firm's ownership in business venture																						49.90%
Partner's ownership in venture business																							50.10%
Venture Origination Year			Sep. 10, 2004				Jul. 07, 2006				Jul. 13, 2010	Jul. 13, 2010
Equity Investments
Notes Receivable, Related Parties, Noncurrent			$ 164,700,000				$ 382,500,000				$ 148,800,000				$ (696,000,000)			$ (820,000,000)
Equity investment in business venture			213,000,000			232,500,000	315,500,000			342,000,000	61,600,000		65,700,000		(590,000,000)			(640,000,000)
Cumulative translation adjustments	57,521,000	155,389,000	39,300,000			59,300,000	24,100,000			53,700,000	(9,400,000)		(3,700,000)
Equity Method Investment Difference Between Carrying Amount And Underlying Equity (Basis Adjustment)			300,000	1,300,000			2,900,000	4,000,000
Investment in capacity expansion														50.00%
Master Lease Agreements
Joint Venture Master Equipment Lease Agreement Amount															2,790,000,000		262,600,000,000
Joint Venture Master Equipment Lease Agreement Outstanding Amount															1,490,000,000		139,900,000,000
Guarantee of Flash Ventures equipment leases			143,492,000		13,500,000,000		342,970,000		32,300,000,000		256,715,000	24,100,000,000			743,177,000	[1]	69,900,000,000	926,000,000
Master Lease Covenants
Minimum Rating																			BB-	BB-	BB+
External Credit Rating																			BB		BBB
Joint Venture Master Equipment Lease Agreement Guarantor Equity Covenant															1,510,000,000
Tax Commitment
Unrecognized tax benefits from the contractual obligation	$ 204,500,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

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Commitments, Contingencies and Guarantees-JV Leases (Details 1) In Thousands, unless otherwise specified			3 Months Ended								3 Months Ended										3 Months Ended
	Mar. 31, 2013 Flash Alliance Ltd [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] JPY (¥)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2008-06 [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2008-06 [Member] JPY (¥)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-03 [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-07 [Member] USD ($)	Mar. 31, 2013 Flash Alliance Ltd [Member] FAL Master Lease Agreement, 2012-07 [Member] JPY (¥)	Mar. 31, 2013 Flash Partners Ltd [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] JPY (¥)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2010-04 [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2010-04 [Member] JPY (¥)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-01 [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-01 [Member] JPY (¥)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-11 [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2011-11 [Member] JPY (¥)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2012-03 [Member] USD ($)	Mar. 31, 2013 Flash Partners Ltd [Member] FPL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Mar. 31, 2013 Flash Forward Ltd [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] JPY (¥)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2011-11 [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2011-11 [Member] JPY (¥)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-03 [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-03 [Member] JPY (¥)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-07 [Member] USD ($)	Mar. 31, 2013 Flash Forward Ltd [Member] FFL Master Lease Agreement, 2012-07 [Member] JPY (¥)	Mar. 31, 2013 Flash Ventures [Member] USD ($)		Mar. 31, 2013 Flash Ventures [Member] JPY (¥)	Dec. 30, 2012 Flash Ventures [Member] USD ($)
Company's portion of the remaining guarantee obligations under each of Flash Ventures' master lease facilities
Lease Agreement Type			Original	Original	Original	Original	Refinanced	Refinanced			Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced	Refinanced			Original	Original	Original	Original	Original	Original
Guarantee of Flash Ventures equipment leases	$ 342,970	¥ 32,300,000	$ 96,867	¥ 9,100,000	$ 85,367	¥ 8,000,000	$ 160,736	¥ 15,200,000	$ 143,492	¥ 13,500,000	$ 14,320	¥ 1,300,000	$ 64,984	¥ 6,100,000	$ 23,111	¥ 2,200,000	$ 41,077	¥ 3,900,000	$ 256,715	¥ 24,100,000	$ 139,886	¥ 13,100,000	$ 85,217	¥ 8,000,000	$ 31,612	¥ 3,000,000	$ 743,177	[1]	¥ 69,900,000	$ 926,000
Lease Expiration (year)			Jul. 31, 2013	Jul. 31, 2013	Mar. 31, 2017	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2017			Oct. 31, 2014	Oct. 31, 2014	Jun. 30, 2014	Jun. 30, 2014	Oct. 31, 2014	Oct. 31, 2014	May 31, 2015	May 31, 2015			Dec. 30, 2016	Dec. 30, 2016	Mar. 31, 2017	Mar. 31, 2017	Jun. 30, 2017	Jun. 30, 2017

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

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Goodwill and Intangible Assets-Intangible Amortization (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Acquisition-related Intangible Assets [Member]
Estimated Amortization Expense of Intangible Assets
2013 (Remaining 9 months)	$ 32,729
2014	40,545
2015	40,380
2016	15,323
Intangible assets subject to amortization	128,977	141,175
Technology licenses and patents [Member]
Estimated Amortization Expense of Intangible Assets
2013 (Remaining 9 months)	17,467
2014	21,231
2015	20,056
2016	3,332
Intangible assets subject to amortization	$ 62,086	$ 68,219

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Commitments, Contingencies and Guarantees-Obligation Tbl (Details 4) (Flash Ventures [Member]) In Thousands, unless otherwise specified	Mar. 31, 2013 USD ($)		Mar. 31, 2013 JPY (¥)	Dec. 30, 2012 USD ($)
Guarantor Obligations
Guarantee of Flash Ventures equipment leases	$ 743,177	[1]	¥ 69,900,000	$ 926,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

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Commitments, Contingencies and Guarantees-Financing Arrangements (Details Textual 4) (USD $)	1 Months Ended	12 Months Ended			1 Months Ended
	May 31, 2006 1% Sr. Convertible Notes due 2013 [Member]	Jan. 01, 2012 1% Sr. Convertible Notes due 2013 [Member]	Mar. 31, 2013 1% Sr. Convertible Notes due 2013 [Member]	Dec. 30, 2012 1% Sr. Convertible Notes due 2013 [Member]	Aug. 31, 2010 1.5% Sr. Convertible Notes due 2017 [Member]	Mar. 31, 2013 1.5% Sr. Convertible Notes due 2017 [Member]	Dec. 30, 2012 1.5% Sr. Convertible Notes due 2017 [Member]
Debt Instruments
Aggregate principal amount of convertible notes, issued and sold	$ 1,150,000,000		$ 928,061,000	$ 928,061,000	$ 1,000,000,000	$ 1,000,000,000	$ 1,000,000,000
Debt Instrument, Issuance Date	May 15, 2006				Aug. 20, 2010
Debt Instrument, Interest Rate, Stated Percentage	1.00%				1.50%
Debt Instrument, Maturity Date	May 15, 2013				Aug. 15, 2017
Extinguishment of Debt, Amount		$ 221,900,000

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Commitments, Contingencies and Guarantees-Future Lease Obligation (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Operating leases future minimum payments
2013 (remaining nine months)	$ 4,299
2014	4,593
2015	3,789
2016	1,211
2017	4
Total future minimum lease rental payments	13,896
Sublease income to be received in the future under noncancelable subleases	(1,639)
Operating Leases, Future Minimum Payments, Net	$ 12,257

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Income Taxes (Details Textuals) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 30, 2012
Provision For Income Taxes
Unrecognized tax benefits that would impact the effective tax rate	$ 176.2		$ 179.5
Unrecognized tax benefits income tax penalties and interest expense or income	0.7	0.8
Expected decrease in unrecognized tax benefits within the next twelve months	$ 83.2

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Financing Arrangements (Tables)

3 Months Ended

Mar. 31, 2013

Debt Instrument

Schedule of Long-term Debt Instruments

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	March 31, 2013			December 30, 2012
1% Notes due 2013	$	928,061		$	928,061
Less: Unamortized bond discount	(7,054		)	(21,353		)
Net carrying amount of 1% Notes due 2013	921,007			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(200,372		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	799,628			789,913
Total convertible debt	1,720,635			1,696,621
Less: Convertible short-term debt	(921,007		)	(906,708		)
Convertible long-term debt	$	799,628		$	789,913

1% Sr. Convertible Notes due 2013 [Member]

Debt Instrument

Interest cost recognized for Convertible notes

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	2,319	$	2,319
Amortization of bond issuance costs	696		696
Amortization of bond discount	14,058		13,025
Total interest cost recognized	$	17,073	$	16,040

1.5% Sr. Convertible Notes due 2017 [Member]

Debt Instrument

Interest cost recognized for Convertible notes

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	3,750	$	3,750
Amortization of bond issuance costs	667		667
Amortization of bond discount	9,519		8,861
Total interest cost recognized	$	13,936	$	13,278

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Balance Sheet Information-Liabilities (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Other Current Accrued Liabilities
Accrued payroll and related expenses	$ 97,458	$ 102,269
Derivative contract payables	34,821	13,584
Taxes payable	27,565	25,476
Other accrued Liabilities	136,333	116,210
Total other current accrued liabilities	296,177	257,539
Non-current liabilities
Deferred tax liabilities	16,753	28,672
Income tax liabilities	204,533	208,629
Deferred credits on intercompany transactions	54,348	58,548
Other non-current liabilities	108,323	112,098
Total non-current liabilities	$ 383,957	$ 407,947

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Derivatives and Hedging Activities (Details 2) (Foreign exchange contracts [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Foreign exchange contracts [Member]
Effective portion of designated cash flow derivative contracts
Amount of gain (loss) recognized in AOCI	$ (30,630)	$ (69,061)
Amount of gain (loss) reclassified from AOCI to the Statements of Operations	$ (1,441)	$ 6,314

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Commitments, Contingencies and Guarantees-Commitment Tbl (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Contractual Obligations
Facility and other operating leases	$ 12,257
Operating Leases, Future Minimum Payments, Net	12,257
Contractual Obligation	5,165,006
1% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	932,701	[1]
1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	1,067,500	[2]
Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	12,257	[3]
Operating Leases, Future Minimum Payments, Net	12,257	[3]
Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	84,851	[3]
Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	55,189
Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	63,247
Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	261,325	[3],[4]
1 Year or Less [Member]
Contractual Obligations
Contractual Obligation	1,989,669
1 Year or Less [Member] | 1% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	932,701	[1]
1 Year or Less [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	7,500	[2]
1 Year or Less [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	3,911	[3]
Operating Leases, Future Minimum Payments, Net	3,911	[3]
1 Year or Less [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	54,851	[3]
1 Year or Less [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	55,029
1 Year or Less [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	59,542
1 Year or Less [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	261,325	[3],[4]
2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Contractual Obligation	1,426,897
2 - 3 Years (Fiscal 2014 and 2015) [Member] | 1% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	0	[1]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	30,000	[2]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	7,277	[3]
Operating Leases, Future Minimum Payments, Net	7,277	[3]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	30,000	[3]
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	127
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	3,705
2 - 3 Years (Fiscal 2014 and 2015) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[3],[4]
4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Contractual Obligation	1,577,662
4 - 5 Years (Fiscal 2016 and 2017) [Member] | 1% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	0	[1]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	1,030,000	[2]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	1,069	[3]
Operating Leases, Future Minimum Payments, Net	1,069	[3]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	0	[3]
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	33
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
4 - 5 Years (Fiscal 2016 and 2017) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[3],[4]
More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Contractual Obligation	170,778
More than 5 Years (Beyond Fiscal 2017) [Member] | 1% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	0	[1]
More than 5 Years (Beyond Fiscal 2017) [Member] | 1.5% Convertible senior notes principal and interest [Member]
Contractual Obligations
Convertible senior notes principal and interest	0	[2]
More than 5 Years (Beyond Fiscal 2017) [Member] | Operating Lease Expense [Member]
Contractual Obligations
Facility and other operating leases	0	[3]
Operating Leases, Future Minimum Payments, Net	0	[3]
More than 5 Years (Beyond Fiscal 2017) [Member] | Toshiba Corporation [Member]
Contractual Obligations
Research and development commitments	0	[3]
More than 5 Years (Beyond Fiscal 2017) [Member] | Capital Equipment Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
More than 5 Years (Beyond Fiscal 2017) [Member] | Operating Expense Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0
More than 5 Years (Beyond Fiscal 2017) [Member] | Noncancelable Production Purchase Commitments [Member]
Contractual Obligations
Unrecorded Unconditional Purchase Obligation	0	[3],[4]
Flash Partners Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	527,765	[3],[5]
Flash Partners Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	149,550	[3],[5]
Flash Partners Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	247,403	[3],[5]
Flash Partners Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	103,328	[3],[5]
Flash Partners Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	27,484	[3],[5]
Flash Alliance Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	1,547,797	[3],[5]
Flash Alliance Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	286,035	[3],[5]
Flash Alliance Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	843,078	[3],[5]
Flash Alliance Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	302,913	[3],[5]
Flash Alliance Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	115,771	[3],[5]
Flash Forward Ltd [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	612,374	[3],[5]
Flash Forward Ltd [Member] | 1 Year or Less [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	179,225	[3],[5]
Flash Forward Ltd [Member] | 2 - 3 Years (Fiscal 2014 and 2015) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	265,307	[3],[5]
Flash Forward Ltd [Member] | 4 - 5 Years (Fiscal 2016 and 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	140,319	[3],[5]
Flash Forward Ltd [Member] | More than 5 Years (Beyond Fiscal 2017) [Member]
Contractual Obligations
Reimbursement for certain Flash Venture fixed costs	$ 27,523	[3],[5]

[1] In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Notes due 2013. The Company will pay cash interest on the outstanding notes at an annual rate of 1.0%, payable semi-annually on May 15 and November 15 of each year until May 15, 2013. In fiscal year 2011, the Company redeemed $221.9 million of the outstanding notes.

[2] In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

[3] Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at March 31, 2013.

[4] Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

[5] Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

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Investments and Fair Value Measurements-AFS Realized Gains and Losses (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Gross realized gains and (losses) on sales of available-for-sale securities
Gross realized gains	$ 718	$ 1,075
Gross realized losses	$ (1,032)	$ (552)

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Balance Sheet Information-OCI (Details 7) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$ 20,407		$ 15,919
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	57,521		155,389
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax	(35,376)		(6,187)
Total accumulated other comprehensive income	42,552		165,121
Other Comprehensive Income (Loss), Tax, Portion Attributable to Parent
Available-for-sale investments	2,053	2,993
Foreign currency translation	(18,311)	(14,195)
Other Comprehensive Income (Loss), Tax	$ (16,258)	$ (11,202)

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Share-Based Compensation-Fair Value (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Fair value of options and RSUs
Fair value of options vested	$ 14,568	$ 14,760
Fair value of RSUs vested	29,821	19,301
Total fair value of options and RSUs vested	$ 44,389	$ 34,061

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Financing Arrangements (Details Textuals) (USD $)			1 Months Ended	3 Months Ended	12 Months Ended		1 Months Ended	3 Months Ended
	Mar. 31, 2013	Dec. 30, 2012	May 31, 2006 1% Sr. Convertible Notes due 2013 [Member]	Mar. 31, 2013 1% Sr. Convertible Notes due 2013 [Member]	Jan. 01, 2012 1% Sr. Convertible Notes due 2013 [Member]	Dec. 30, 2012 1% Sr. Convertible Notes due 2013 [Member]	Aug. 31, 2010 1.5% Sr. Convertible Notes due 2017 [Member]	Mar. 31, 2013 1.5% Sr. Convertible Notes due 2017 [Member]	Dec. 30, 2012 1.5% Sr. Convertible Notes due 2017 [Member]
Debt Instrument
Convertible debt, par value			$ 1,150,000,000	$ 928,061,000		$ 928,061,000	$ 1,000,000,000	$ 1,000,000,000	$ 1,000,000,000
Debt Instrument, Interest Rate, Effective Percentage				7.40%		7.40%		6.85%	6.85%
Convertible Senior Notes, issuance date			May 15, 2006				Aug. 20, 2010
Convertible Senior Notes, due date			May 15, 2013				Aug. 15, 2017
Convertible senior notes, interest rate			1.00%				1.50%
Initial conversion rate, number of share converted			12.1426				19.0931
Conversion of notes, base conversion price			1,000				1,000
Initial conversion price per share			$ 82.36				$ 52.37
Net proceeds from the offering of the Notes due			1,130,000,000				981,000,000
Principal amount of the liability component			753,500,000				706,000,000
Effective interest rate on the liability component			7.40%				6.85%
Carrying value of the equity component				394,300,000		394,300,000	294,000,000	294,000,000	294,000,000
Debt Instrument, Unamortized Bond Discount				7,054,000		21,353,000		200,372,000	210,087,000
Remaining amortization period of convertible debt, in years				0 years 1 month				4 years 5 months
Unamortized Debt Issuance Expense	8,237,000	8,708,000
Bond Redemption
Extinguishment of Debt, Amount					$ 221,900,000
Warrants
Number of shares initially agreed to be sold to counterparties			14,000,000				19,100,000
Exercise price of warrants			95.03				73.33
Number of shares counterparties can purchase from entity net of redemption				11,300,000
Expected Life of Warrants				0 years 5 months				4 years 8 months
Expiry period of Warrants				20 different dates from August 23, 2013 through September 20, 2013				40 different dates from November 13, 2017 through January 10, 2018
Number of warrants exercised				0				0
Convertible Bond Hedge
Number of shares initially agreed to be purchased from counterparties			14,000,000				19,100,000
Bond hedge options, exercise price			$ 82.36				$ 52.37
Number of shares an entity can purchase from counterparties net of redemption				11,300,000
Number of shares purchased under bond hedge				0				0

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Balance Sheet Information-Inventory (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Inventory
Raw Material	$ 389,004	$ 404,634
Work-in-Process	126,874	102,249
Finished Goods	218,059	243,192
Total Inventory	$ 733,937	$ 750,075

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Balance Sheet Information

3 Months Ended

Mar. 31, 2013

Balance Sheet Information [Abstract]

Balance Sheet Information

Balance Sheet Information

Accounts Receivable, net. Accounts receivable, net, was as follows (in thousands):

	March 31, 2013			December 30, 2012
Accounts receivable from product revenues	$	584,698		$	766,583
Accounts receivable from license and royalty revenues	—			37,638
Allowance for doubtful accounts	(6,377		)	(6,627		)
Price protection, promotions and other activities	(138,825		)	(171,569		)
Total accounts receivable, net	$	439,496		$	626,025

Inventory. Inventory was as follows (in thousands):

	March 31, 2013		December 30, 2012
Raw material	$	389,004	$	404,634
Work-in-process	126,874		102,249
Finished goods	218,059		243,192
Total inventory	$	733,937	$	750,075

Other Current Assets. Other current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Tax-related receivables	$	177,942	$	186,223
Other non-trade receivable	35,130		—
Prepayment to Flash Forward Ltd.	20,577		20,577
Derivative contract receivables	14,937		19,064
Prepaid expenses	11,835		13,221
Other current assets	12,336		21,794
Total other current assets	$	272,757	$	260,879

Notes Receivable and Investments in Flash Ventures. Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	March 31, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	164,701	$	180,254
Notes receivable, Flash Alliance Ltd.	382,531		476,800
Notes receivable, Flash Forward Ltd.	148,762		162,810
Investment in Flash Partners Ltd.	213,027		232,547
Investment in Flash Alliance Ltd.	315,453		342,048
Investment in Flash Forward Ltd.	61,599		65,653
Total notes receivable and investments in Flash Ventures	$	1,286,073	$	1,460,112

Equity-method investments and the Company’s maximum loss exposure related to Flash Ventures are discussed further in Note 11, “Commitments, Contingencies and Guarantees – Flash Ventures” and Note 12, “Related Parties and Strategic Investments.”

The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the borrower, where material or known. Impairments, when required for credit worthiness, are recorded in other income (expense). The Company makes or will make long-term loans to Flash Ventures to fund new process technologies and additional wafer capacities. The Company aggregates its Flash Ventures notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity. For all reporting periods presented, no loans were past due and no loan impairments were recorded.

Other Non-Current Assets. Other non-current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	41,025	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	8,237		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	35,898		34,832
Total other non-current assets	$	148,168	$	153,810

Other Current Accrued Liabilities. Other current accrued liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Accrued payroll and related expenses	$	97,458	$	102,269
Derivative contract payables	34,821		13,584
Taxes payable	27,565		25,476
Other accrued liabilities	136,333		116,210
Total other current accrued liabilities	$	296,177	$	257,539

Non-current liabilities. Non-current liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Deferred tax liabilities	$	16,753	$	28,672
Income tax liabilities	204,533		208,629
Deferred credits on intercompany transactions	54,348		58,548
Other non-current liabilities	108,323		112,098
Total non-current liabilities	$	383,957	$	407,947

Warranties. The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Balance, beginning of period	$	38,787		$	26,957
Additions and adjustments to cost of revenues	4,878			10,406
Usage	(4,693		)	(5,244		)
Balance, end of period	$	38,972		$	32,119

The majority of the Company’s products have a warranty of less than three years, with a small number of products having a warranty ranging up to ten years or more. For 100-year or lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure. A provision for the estimated future cost related to warranty expense is recorded at the time of customer invoice. The Company’s warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair or replacement costs, differ from the Company’s estimates, increases or decreases to its warranty liability would be required.

Comprehensive Income (Loss) Note

Accumulated Other Comprehensive Income. AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	March 31, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	20,407		$	15,919
Foreign currency translation	57,521			155,389
Hedging activities	(35,376		)	(6,187		)
Total accumulated other comprehensive income	$	42,552		$	165,121

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Available-for-sale investments	$	2,053		$	2,993
Foreign currency translation	(18,311		)	(14,195		)
	$	(16,258	)	$	(11,202	)

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended
AOCI Component	March 31, 2013			April 1, 2012			Income Statement Line Item
Unrealized gain (loss) on available-for-sale investments	$	(314	)	$	523		Interest (expense) and other income (expense), net
	(175		)	(169		)	Tax expense
	(489		)	354			Net of tax
Gain (loss) on hedging activities:
Foreign exchange contracts	(1,441		)	6,314			Cost of revenues
	—			—			Tax expense
	(1,441		)	6,314			Net of tax
Total reclassifications for the period	$	(1,930	)	$	6,668		Net of tax

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Share Repurchase Program (Details Textuals) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Share Repurchase Program Summary
Share Repurchase Program, Authorized Amount	$ 1,250,000,000
Share Repurchase Program, Period in Force	5 years 0 months
Share Repurchase Program, Remaining Authorized Repurchase Amount	926,400,000
Share Repurchased and Retired During Program, Shares	7.49
Payments for Repurchase of Common Stock, Aggregate	323,600,000
Share Repurchased and Retired During Period, Shares	1.76
Payments for Repurchase of Common Stock During Period	$ 89,600,000

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Derivatives and Hedging Activities (Details 3) (Foreign exchange contracts [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Foreign exchange contracts [Member]
Derivative Instruments, Gain (Loss)
Foreign exchange contracts	$ (307)	$ (4,447)

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Commitments Contingencies and Guarantees (Tables)

3 Months Ended

Mar. 31, 2013

Commitments Contingencies and Guarantees [Abstract]

Company's portion of the remaining guarantee obligations under each of Flash Ventures' master lease facilities

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at March 31, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.3	$	14,320	2014
January 2011	Refinanced	6.1		64,984		2014
November 2011	Refinanced	2.2		23,111		2014
March 2012	Refinanced	3.9		41,077		2015
		13.5		143,492
Flash Alliance
June 2008	Original	9.1		96,867		2013
March 2012	Original	8.0		85,367		2017
July 2012	Refinanced	15.2		160,736		2017
		32.3		342,970
Flash Forward
November 2011	Original	13.1		139,886		2016
March 2012	Original	8.0		85,217		2017
July 2012	Original	3.0		31,612		2017
		24.1		256,715
Total guarantee obligations		¥	69.9	$	743,177

Remaining guarantee obligations

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of March 31, 2013 in U.S. dollars based upon the yen/dollar exchange rate at March 31, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	154,103	$	88,197	$	242,300
Year 2	155,389		49,040		204,429
Year 3	105,202		12,152		117,354
Year 4	72,340		61,233		133,573
Year 5	19,261		26,260		45,521
Total guarantee obligations	$	506,295	$	236,882	$	743,177

Contractual Obligations

Contractual cash obligations and commitments as of March 31, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 9 months in Fiscal 2013)		2 –3 Years (Fiscal 2014 and 2015)		4 –5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	12,257	(5)	$	3,911	$	7,277	$	1,069	$	—
Flash Partners (1)	527,765		(5)(6)	149,550		247,403		103,328		27,484
Flash Alliance (1)	1,547,797		(5)(6)	286,035		843,078		302,913		115,771
Flash Forward (1)	612,374		(5)(6)	179,225		265,307		140,319		27,523
Toshiba research and development	84,851		(5)	54,851		30,000		—		—
Capital equipment purchase commitments	55,189			55,029		127		33		—
1% Convertible senior notes principal and interest (2)	932,701			932,701		—		—		—
1.5% Convertible senior notes principal and interest (3)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	63,247			59,542		3,705		—		—
Noncancelable production purchase commitments (4)	261,325		(5)	261,325		—		—		—
Total contractual cash obligations	$	5,165,006		$	1,989,669	$	1,426,897	$	1,577,662	$	170,778

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Notes due 2013. The Company will pay cash interest on the outstanding notes at an annual rate of 1.0%, payable semi-annually on May 15 and November 15 of each year until May 15, 2013. In fiscal year 2011, the Company redeemed $221.9 million of the outstanding notes.

⁽³⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽⁴⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁵⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at March 31, 2013.

⁽⁶⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

The Company has excluded $204.5 million of unrecognized tax benefits (which includes penalties and interest) from the contractual obligation table above due to the uncertainty with respect to the timing of associated future cash flows at March 31, 2013. The Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Off Balance Sheet Arrangements

Off-balance sheet arrangements are as follows (in thousands):

	March 31, 2013
Guarantee of Flash Ventures equipment leases (1)	$	743,177

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

Operating leases future minimum payments

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2013 through fiscal year 2017. Future minimum lease payments are presented below (in thousands):

	March 31, 2013
Fiscal year:
2013 (remaining nine months)	$	4,299
2014	4,593
2015	3,789
2016	1,211
2017	4
	13,896
Sublease income to be received in the future under noncancelable subleases	(1,639		)
Net operating leases	$	12,257

Net rent expense

Net rent expense was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Rent expense, net	$	1,843	$	1,113

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Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Computation of basic and diluted net income (loss) per share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended
	March 31, 2013		April 1, 2012
Numerator for basic net income per share:
Net income	$	166,229	$	114,385
Denominator for basic net income per share:
Weighted average common shares outstanding	242,519		242,883
Basic net income per share	$	0.69	$	0.47
Numerator for diluted net income per share:
Net income	$	166,229	$	114,385
Denominator for diluted net income per share:
Weighted average common shares outstanding	242,519		242,883
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	3,058		4,219
Shares used in computing diluted net income per share	245,577		247,102
Diluted net income per share	$	0.68	$	0.46
Anti-dilutive shares excluded from net income per share calculation	68,296		68,352

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Goodwill and Intangible Assets-Intangibles (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Intangible Assets
Total Intangible Assets, gross	$ 394,244	$ 474,904
Accumulated Amortization	(165,656)	(227,125)
Intangible Asset Adjustment		(860)
Total Intangible Assets, net	228,588	246,919
Acquired in-process research and development [Member]
Intangible Assets
Gross Carrying Amount, Indefinite-lived Intangible Asset	37,525	38,385
Adjustments of indefinite lived intangible assets		(860)
Net Carrying Amount, Indefinite-lived Intangible Assets	37,525	37,525
Developed product technology [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	200,960	200,960
Accumulated Amortization	(77,934)	(68,104)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	123,026	132,856
Core Technology [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset		79,800
Accumulated Amortization		(79,800)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization		0
Customer relationships [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	13,050	13,050
Accumulated Amortization	(11,710)	(10,043)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	1,340	3,007
Trademarks [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	5,700	5,700
Accumulated Amortization	(2,184)	(1,870)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	3,516	3,830
Covenants not to compete [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	3,100	3,100
Accumulated Amortization	(2,005)	(1,618)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	1,095	1,482
Technology licenses and patents [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	133,909	133,909
Accumulated Amortization	(71,823)	(65,690)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	62,086	68,219
Acquisition-related Intangible Assets [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	222,810	302,610
Accumulated Amortization	(93,833)	(161,435)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	128,977	141,175
Intangible assets subject to amortization [Member]
Intangible Assets
Gross Carrying Amount, Finite-lived Intangible Asset	356,719	436,519
Accumulated Amortization	(165,656)	(227,125)
Adjustments of finite lived intangible assets		0
Intangible assets subject to amortization	$ 191,063	$ 209,394

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Derivatives and Hedging Activities (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Effect of nondesignated derivative contracts
Gain (loss) on foreign exchange contracts including forward point income	$ 9,659	$ 4,962
Gain (loss) from revaluation of foreign currency exposures hedged by foreign exchange contracts	$ (11,383)	$ (4,211)

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Related Parties and Strategic Investments (Tables)

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	March 31, 2013		December 30, 2012
Notes receivable	$	696	$	820
Equity investments	590		640
Operating lease guarantees	743		926
Prepayments	21		26
Maximum loss exposure	$	2,050	$	2,412

XML

Organization and Summary of Significant Accounting Policies (Details Textuals)	3 Months Ended
	Mar. 31, 2013 Week	Apr. 01, 2012 Week	Dec. 30, 2012
Organization and Presentation
Exchange rate used to translate Japanese yen to U.S. dollar	94.11	82.25	85.99
Number of Weeks in Fiscal Quarter	13	13

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Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2013

Derivative Instruments, Gain (Loss)

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivatives and Hedging Activities

The Company uses derivative instruments primarily to manage exposures to foreign currency. The Company’s primary objective in holding derivative instruments is to reduce the volatility of earnings and cash flows associated with changes in foreign currency. The program is not designated for trading or speculative purposes. The Company’s derivative instruments expose the Company to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. The Company seeks to mitigate such risk by limiting its counterparties to major financial institutions and by spreading the risk across several major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored by the Company on an ongoing basis.

The Company recognizes derivative instruments as either assets or liabilities on the balance sheet at fair value and provides qualitative disclosures about objectives and strategies for using derivative instruments, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as cost of revenues or other income (expense), or as accumulated other comprehensive income (“AOCI”). The Company does not offset or net the fair value amounts of derivative instruments and separately discloses the fair value amounts of the derivative instruments as either assets or liabilities.

Cash Flow Hedges. The Company uses forward contracts designated as cash flow hedges to hedge a portion of future forecasted purchases in Japanese yen. The gain or loss on the effective portion of a cash flow hedge is initially reported as a component of AOCI and subsequently reclassified into cost of revenues in the same period or periods in which the cost of revenues is recognized, or reclassified into other income (expense) if the hedged transaction becomes probable of not occurring. Any gain or loss after a hedge is no longer designated, because it is no longer probable of occurring or it is related to an ineffective portion of a cash flow hedge, as well as any amount excluded from the Company’s hedge effectiveness, is recognized as other income (expense) immediately. As of March 31, 2013, the Company had forward contracts in place to hedge future purchases of approximately 12.3 billion Japanese yen, or approximately $131 million based upon the exchange rate as of March 31, 2013, and the net unrealized loss on the effective portion of these cash flow hedges was ($12.9) million. The forward contracts on the Company’s future Japanese yen wafer purchases will substantially settle in the second quarter of fiscal year 2013 with no contracts settling beyond twelve months.

Other Derivatives. Other derivatives that are non-designated consist primarily of forward and cross currency swap contracts to minimize the risk associated with the foreign exchange effects of revaluing monetary assets and liabilities. Monetary assets and liabilities denominated in foreign currencies and the associated outstanding forward and cross currency swap contracts were marked-to-market at March 31, 2013 with realized and unrealized gains and losses included in other income (expense). As of March 31, 2013, the Company had foreign currency forward contracts hedging exposures in European euros, British pounds and Japanese yen. Foreign currency forward contracts were outstanding to buy and sell U.S. dollar equivalents of approximately $196.1 million and $101.7 million in foreign currencies, respectively, based upon the exchange rates at March 31, 2013.

The Company currently has a cross currency swap contract to exchange Japanese yen for U.S. dollars that requires the Company to comply with certain covenants, the strictest of which is to maintain a minimum liquidity of $1.0 billion. Liquidity is defined as the sum of the Company’s cash and cash equivalents and short and long-term marketable securities. This cross currency swap contract was outstanding to sell U.S. dollar equivalents of approximately $30.8 million based upon the exchange rate at March 31, 2013. Should the Company fail to comply with these covenants, the Company may be required to settle the unrealized gain or loss on the foreign exchange contract prior to the original maturity date. The Company was in compliance with these covenants as of March 31, 2013.

The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and counterparty credit risk.

Fair Value of Derivative Contracts. Fair value of derivative contracts as of March 31, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	260	$	—	$	—	$	—
Foreign exchange contracts not designated	14,677		19,064		—		994
Total derivatives	$	14,937	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	13,167	$	7,058	$	—	$	—
Foreign exchange contracts not designated	21,654		6,526		—		—
Total derivatives	$	34,821	$	13,584	$	—	$	—

Foreign Exchange and Equity Market Risk Contracts Designated as Cash Flow Hedges. The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three months endedMarch 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	Amount of loss recognized in AOCI						Amount of gain (loss) reclassified from AOCI to earnings
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(30,630	)	$	(69,061	)	$	(1,441	)	$	6,314

Foreign exchange contracts designated as cash flow hedges relate primarily to wafer purchases in Japanese yen. Gains and losses associated with foreign exchange contracts designated as cash flow hedges are expected to be recorded in cost of revenues when reclassified out of AOCI. The Company expects to realize the majority of the AOCI balance related to foreign exchange contracts within the next twelve months.

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(307	)	$	(4,447	)

Effect of Non-Designated Derivative Contracts on the Condensed Consolidated Statements of Operations. The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Gain on foreign exchange contracts including forward point income	$	9,659		$	4,962
Loss from revaluation of foreign currency exposures hedged by foreign exchange contracts	(11,383		)	(4,211		)

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Investments and Fair Value Measurements-Cash and Mkt Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012	Apr. 01, 2012	Jan. 01, 2012
Cash, Cash Equivalents and Marketable Securities [Abstract]
Cash and Cash Equivalents	$ 1,148,110	$ 995,470	$ 1,093,263	$ 1,167,496
Short-term marketable securities	2,162,073	1,880,034
Long-term marketable securities	2,882,710	2,835,931
Total cash, cash equivalents and marketable securities	$ 6,192,893	$ 5,711,435

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Related Parties and Strategic Investments (Details 1) (Flash Ventures [Member])	Mar. 31, 2013 USD ($)		Mar. 31, 2013 JPY (¥)	Dec. 30, 2012 USD ($)
Maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate
Notes receivable	$ 696,000,000			$ 820,000,000
Equity investments	590,000,000			640,000,000
Guarantee of Flash Ventures equipment leases	743,177,000	[1]	69,900,000,000	926,000,000
Prepayments	21,000,000			26,000,000
Maximum loss exposure	$ 2,050,000,000			$ 2,412,000,000

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

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Investments and Fair Value Measurements (Details Textual) (USD $)	Mar. 31, 2013	Dec. 30, 2012
Investments and Fair Value Measurements
Cash	$ 212,500,000	$ 183,400,000
Assets, Fair Value Disclosure	5,995,327,000	5,548,126,000
Liabilities, Fair Value Disclosure	34,821,000	13,584,000
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0
Fair Value, Inputs, Level 3 [Member]
Investments and Fair Value Measurements
Assets, Fair Value Disclosure	0	0
Liabilities, Fair Value Disclosure	$ 0	$ 0

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Balance Sheet Information-AOCI (Details 8) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Other Comprehensive Income
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	$ 314	$ (523)
Cost of Sales [Member]
Other Comprehensive Income
Foreign Currency Cash Flow Hedge Gain (Loss) Reclassified to Cost of Sales, Before Tax	(1,441)	6,314
Other Comprehensive Income (Loss), Reclassification Adjustment on Derivatives Included in Net Income, Tax	0	0
Foreign Currency Cash Flow Hedge Gain (Loss) Reclassified to Earnings, Net	(1,441)	6,314
Other Income [Member]
Other Comprehensive Income
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, before Tax	(314)	523
Other Comprehensive Income (Loss), Reclassification Adjustment for Sale of Securities Included in Net Income, Tax	(175)	(169)
Other Comprehensive Income (Loss), Unrealized Holding Gain (Loss) on Securities Arising During Period, Net of Tax	(489)	354
Net Income [Member]
Other Comprehensive Income
Total reclassifications for the period	$ (1,930)	$ 6,668

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Net Income Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Numerator for basic net income per share:
Net income	$ 166,229	$ 114,385
Denominator for basic net income per share:
Weighted average common shares outstanding	242,519	242,883
Basic net income per share	$ 0.69	$ 0.47
Numerator for diluted net income per share:
Net income	$ 166,229	$ 114,385
Denominator for diluted net income per share:
Weighted average common shares outstanding	242,519	242,883
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	3,058	4,219
Shares used in computing diluted net income per share	245,577	247,102
Diluted net income per share	$ 0.68	$ 0.46
Antidilutive Shares
Anti-dilutive shares excluded from net income per share calculation	68,296	68,352

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Current assets:
Cash and cash equivalents	$ 1,148,110	$ 995,470
Short-term marketable securities	2,162,073	1,880,034
Accounts receivable, net	439,496	626,025
Inventory	733,937	750,075
Deferred taxes	94,488	93,877
Other current assets	272,757	260,879
Total current assets	4,850,861	4,606,360
Long-term marketable securities	2,882,710	2,835,931
Property and equipment, net	659,222	665,542
Notes receivable and investments in Flash Ventures	1,286,073	1,460,112
Deferred taxes	118,481	168,718
Goodwill	202,336	201,735
Intangible assets, net	228,588	246,919
Other non-current assets	148,168	153,810
Total assets	10,376,439	10,339,127
Current liabilities:
Accounts payable trade	257,357	254,459
Accounts payable to related parties	176,905	214,806
Convertible short-term debt	921,007	906,708
Other current accrued liabilities	296,177	257,539
Deferred income on shipments to distributors and retailers and deferred revenue	221,644	248,155
Total current liabilities	1,873,090	1,881,667
Convertible long-term debt	799,628	789,913
Non-current liabilities	383,957	407,947
Total liabilities	3,056,675	3,079,527
Commitments and contingencies
Stockholders' equity:
Preferred stock	0	0
Common stock	243	241
Capital in excess of par value	5,104,549	5,027,271
Retained earnings	2,175,088	2,071,268
Accumulated other comprehensive income	42,552	165,121
Total stockholders' equity	7,322,432	7,263,901
Non-controlling interests	(2,668)	(4,301)
Total equity	7,319,764	7,259,600
Total liabilities and equity	$ 10,376,439	$ 10,339,127

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Derivatives and Hedging Activities (Details Textuals)		3 Months Ended
	Mar. 31, 2013 USD ($)	Mar. 31, 2013 Realized within twelve months [Member] USD ($)	Mar. 31, 2013 Realized within twelve months [Member] JPY (¥)
Derivatives and Hedging Activities
Forward contracts cash flow hedge for future purchases of currency		$ 131,000,000	¥ 12,300,000,000
Unrealized Gain (Loss) on Foreign Currency Derivatives, Net, before Tax		(12,900,000)
Foreign currency forward contracts outstanding to buy dollar		196,100,000
Foreign currency forward contracts outstanding to sell dollar		101,700,000
Cash Flow Hedge
Minimum liquidity	1,000,000,000
Notional amount of currency swap transactions	$ 30,800,000

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Organization and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Organization and Summary of Significant Accounting Policies

Organization

These interim Condensed Consolidated Financial Statements are unaudited but reflect, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, necessary to present fairly the financial position of SanDisk Corporation and its subsidiaries (the “Company”) as of March 31, 2013, the Condensed Consolidated Statements of Operations, the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Statements of Cash Flows for the three months endedMarch 31, 2013 and April 1, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). These Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s most recent Annual Report on Form 10‑K filed with the SEC on February 19, 2013. The results of operations for the three months ended March 31, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The first quarters of fiscal years 2013 and 2012 ended on March 31, 2013 and April 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 94.11, 85.99 and 82.25 at March 31, 2013, December 30, 2012 and April 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Cash Flows and in Note 4, “Balance Sheet Information.” Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using our flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

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Financing Arrangements-Carrying Value and Interest (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012	Mar. 31, 2013 1% Sr. Convertible Notes due 2013 [Member]	Dec. 30, 2012 1% Sr. Convertible Notes due 2013 [Member]	May 31, 2006 1% Sr. Convertible Notes due 2013 [Member]	Mar. 31, 2013 1.5% Sr. Convertible Notes due 2017 [Member]	Dec. 30, 2012 1.5% Sr. Convertible Notes due 2017 [Member]	Aug. 31, 2010 1.5% Sr. Convertible Notes due 2017 [Member]
Debt Summary
Convertible debt, carrying value	$ 1,720,635	$ 1,696,621	$ 921,007	$ 906,708		$ 799,628	$ 789,913
Convertible short-term debt, carrying value	(921,007)	(906,708)
Convertible long-term debt, carrying value	799,628	789,913
Carrying Value of Convertible Notes
Convertible debt, par value			928,061	928,061	1,150,000	1,000,000	1,000,000	1,000,000
Unamortized bond discount			(7,054)	(21,353)		(200,372)	(210,087)
Convertible debt, carrying value	$ 1,720,635	$ 1,696,621	$ 921,007	$ 906,708		$ 799,628	$ 789,913

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Investments and Fair Value Measurements-AFS Investments (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Fixed Income Securities [Member]
Available-for-sale investments
Amortized Cost	$ 5,153,393	$ 4,920,082
Gross Unrealized Gain	32,208	27,111
Gross Unrealized Loss	(424)	(1,868)
Fair Value	5,185,177	4,945,325
U.S. Treasury and government agency securities [Member]
Available-for-sale investments
Amortized Cost	65,727	27,377
Gross Unrealized Gain	13	9
Gross Unrealized Loss	0	0
Fair Value	65,740	27,386
U.S. Government-sponsored agency securities [Member]
Available-for-sale investments
Amortized Cost	23,525	28,339
Gross Unrealized Gain	36	41
Gross Unrealized Loss	(1)	(1)
Fair Value	23,560	28,379
International Government Securities [Member]
Available-for-sale investments
Amortized Cost	17,093	153,936
Gross Unrealized Gain	1	13
Gross Unrealized Loss	(15)	(3)
Fair Value	17,079	153,946
Corporate notes and bonds [Member]
Available-for-sale investments
Amortized Cost	847,920	864,170
Gross Unrealized Gain	3,434	3,890
Gross Unrealized Loss	(69)	(938)
Fair Value	851,285	867,122
Asset-backed securities [Member]
Available-for-sale investments
Amortized Cost	184,368	179,356
Gross Unrealized Gain	225	453
Gross Unrealized Loss	(43)	0
Fair Value	184,550	179,809
Mortgage-backed securities [Member]
Available-for-sale investments
Amortized Cost	1,703	1,872
Gross Unrealized Gain	0	8
Gross Unrealized Loss	(22)	(14)
Fair Value	1,681	1,866
Municipal notes and bonds [Member]
Available-for-sale investments
Amortized Cost	4,013,057	3,665,032
Gross Unrealized Gain	28,499	22,697
Gross Unrealized Loss	(274)	(912)
Fair Value	$ 4,041,282	$ 3,686,817

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Share-Based Compensation-RSU Rollforward (Details 3) (Restricted Stock Units (RSUs) [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Restricted Stock Units (RSUs) [Member]
Summary of the changes in RSUs outstanding
Beginning Balance,Non-vested share units	3,077
Beginning Balance,Non-vested share units Weighted Average Grant Date Fair Value (per share)	$ 43.51
Beginning Balance,Non-vested share units Aggregate Intrinsic Value	$ 131,622,000
Granted, Shares	1,839
Granted Weighted Average Grant Date Fair Value (per share)	$ 51.50
Vested, Shares	(697)
Vested Weighted Average Grant Date Fair Value (per share)	$ 42.83
Vested Aggregate Intrinsic Value	$ 35,026,000
Forfeited, Shares	(68)
Forfeited Weighted Average Grant Date Fair Value (per share)	$ 43.81
Ending Balance Non-vested share units	4,151
Ending Balance Non-vested share units Weighted Average Grant Date Fair Value (per share)	$ 47.18
Ending Balance,Non-vested share units Aggregate Intrinsic Value	$ 195,851,000

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2013

Derivative Instruments, Gain (Loss)

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

Fair value of derivative contracts as of March 31, 2013 and December 30, 2012 were as follows (in thousands):

	Derivative assets reported in
	Other Current Assets				Other Non-current Assets
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	260	$	—	$	—	$	—
Foreign exchange contracts not designated	14,677		19,064		—		994
Total derivatives	$	14,937	$	19,064	$	—	$	994

	Derivative liabilities reported in
	Other Current Accrued Liabilities				Non-current Liabilities
	March 31, 2013		December 30, 2012		March 31, 2013		December 30, 2012
Foreign exchange contracts designated	$	13,167	$	7,058	$	—	$	—
Foreign exchange contracts not designated	21,654		6,526		—		—
Total derivatives	$	34,821	$	13,584	$	—	$	—

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The impact of the effective portion of designated cash flow derivative contracts on the Company’s results of operations for the three months endedMarch 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	Amount of loss recognized in AOCI						Amount of gain (loss) reclassified from AOCI to earnings
	March 31, 2013			April 1, 2012			March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(30,630	)	$	(69,061	)	$	(1,441	)	$	6,314

Derivative Instruments Gain Loss Recognized In Income Ineffective Portion And Amount Excluded From Effectiveness Testing Net

The following table includes the ineffective portion of designated cash flow derivative contracts and the forward points excluded for the purposes of cash flow hedging designation recognized in other income (expense) (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Foreign exchange contracts	$	(307	)	$	(4,447	)

Effect Of Non-designated Derivative Contracts

The effect of non-designated derivative contracts on the Company’s results of operations recognized in other income (expense) was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Gain on foreign exchange contracts including forward point income	$	9,659		$	4,962
Loss from revaluation of foreign currency exposures hedged by foreign exchange contracts	(11,383		)	(4,211		)

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Investments and Fair Value Measurements-AFS FV and Unrealized Losses (Details 5) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	$ 277,810
Less than 12 months, Gross Unrealized Loss	(423)
Greater than 12 months, Fair Value	5,000
Greater than 12 months, Gross Unrealized Loss	(1)
U.S. Treasury and government agency securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	4,199
Less than 12 months, Gross Unrealized Loss	0
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	0
U.S. Government-sponsored agency securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	6,156
Less than 12 months, Gross Unrealized Loss	(1)
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	0
International Government Securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	9,868
Less than 12 months, Gross Unrealized Loss	(15)
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	0
Corporate notes and bonds [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	77,132
Less than 12 months, Gross Unrealized Loss	(68)
Greater than 12 months, Fair Value	5,000
Greater than 12 months, Gross Unrealized Loss	(1)
Asset-backed securities [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	45,241
Less than 12 months, Gross Unrealized Loss	(43)
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	0
Mortgage Backed Securities, Other [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	1,681
Less than 12 months, Gross Unrealized Loss	(22)
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	0
Municipal notes and bonds [Member]
Available-for-sale securities that were in an unrealized gain position
Less than 12 months, Fair Value	133,533
Less than 12 months, Gross Unrealized Loss	(274)
Greater than 12 months, Fair Value	0
Greater than 12 months, Gross Unrealized Loss	$ 0

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill balances as of March 31, 2013 and December 30, 2012 are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of March 31, 2013	$	202,336

Intangible Assets

Intangible asset balances are presented below (in thousands):

	March 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(77,934	)	$	123,026
Customer relationships	13,050		(11,710		)	1,340
Trademarks	5,700		(2,184		)	3,516
Covenants not to compete	3,100		(2,005		)	1,095
Acquisition-related intangible assets	222,810		(93,833		)	128,977
Technology licenses and patents	133,909		(71,823		)	62,086
Total intangible assets subject to amortization	356,719		(165,656		)	191,063
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(165,656	)	$	228,588

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

Estimated Amortization Expense of Intangible Assets

The annual expected amortization expense of intangible assets as of March 31, 2013, excluding acquired in-process research and development, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining nine months)	$	32,729	$	17,467
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,332
Total intangible assets subject to amortization	$	128,977	$	62,086

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Share-Based Compensation-Activity (Details Textuals 1) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Dec. 30, 2012
Compensation and Benefits
Share-based compensation expense capitalized in inventory	$ 2.4	$ 1.8
Employee Stock Option [Member]
Compensation and Benefits
Total unrecognized compensation cost, net of forfeitures, related to awards granted to employees	70.9
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	2 years 7 months
Restricted Stock Units (RSUs) [Member]
Compensation and Benefits
Total unrecognized compensation cost, net of forfeitures, related to awards granted to employees	151.9
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	3 years 2 months
Employee Stock Purchase Plan Shares [Member]
Compensation and Benefits
Total unrecognized compensation expense for ESPP	$ 2.8
Employee service, Nonvested awards, Total Compensation Cost not yet Recognized, Period for Recognition	0 years 5 months

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Investments and Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Investments and Fair Value Measurements [Abstract]

Investments and Fair Value Measurements

Investments and Fair Value Measurements

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	March 31, 2013		December 30, 2012
Cash and cash equivalents	$	1,148,110	$	995,470
Short-term marketable securities	2,162,073		1,880,034
Long-term marketable securities	2,882,710		2,835,931
Total cash, cash equivalents and marketable securities	$	6,192,893	$	5,711,435

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	795,213	$	—	$	—	$	795,213	$	582,743	$	—	$	—	$	582,743
Fixed income securities	65,740		5,119,437		—		5,185,177		27,386		4,917,939		—		4,945,325
Derivative assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	815,213	$	120,394	$	—	$	935,607	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	43,435		2,118,638		—		2,162,073		16,589		1,863,445		—		1,880,034
Long-term marketable securities	2,305		2,880,405		—		2,882,710		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $212.5 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012, respectively.

During the three months endedMarch 31, 2013, the Company had no transfers of financial assets or liabilities between Level 1 and Level 2. As of March 31, 2013 and December 30, 2012, the Company had no financial assets or liabilities categorized as Level 3 and had not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

Available-for-Sale Investments. Available-for-sale investments were as follows (in thousands):

	March 31, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Fixed income securities:
U.S. Treasury securities	$	65,727	$	13	$	—		$	65,740	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	23,525		36		(1		)	23,560		28,339		41		(1		)	28,379
International government securities	17,093		1		(15		)	17,079		153,936		13		(3		)	153,946
Corporate notes and bonds	847,920		3,434		(69		)	851,285		864,170		3,890		(938		)	867,122
Asset-backed securities	184,368		225		(43		)	184,550		179,356		453		—			179,809
Mortgage-backed securities	1,703		—		(22		)	1,681		1,872		8		(14		)	1,866
Municipal notes and bonds	4,013,057		28,499		(274		)	4,041,282		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	5,153,393	$	32,208	$	(424	)	$	5,185,177	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

The fair value and gross unrealized losses on the available-for-sale securities that have been in an unrealized loss position, aggregated by type of investment instrument, and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2013, are summarized in the following table (in thousands). Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Less than 12 months					Greater than 12 months
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	4,199	$	—		$	—	$	—
U.S. government-sponsored agency securities	6,156		(1		)	—		—
International government securities	9,868		(15		)	—		—
Corporate notes and bonds	77,132		(68		)	5,000		(1		)
Asset-backed securities	45,241		(43		)	—		—
Mortgage-backed securities	1,681		(22		)	—		—
Municipal notes and bonds	133,533		(274		)	—		—
Total	$	277,810	$	(423	)	$	5,000	$	(1	)

The gross unrealized loss related to U.S. Treasury and government-sponsored agency securities, international government securities, corporate and municipal notes and bonds, and asset-backed and mortgage-backed securities was primarily due to changes in interest rates. The gross unrealized loss on all available-for-sale fixed income securities at March 31, 2013 was considered temporary in nature. Factors considered in determining whether a loss is temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold an investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt security investments, the Company considered additional factors including the Company’s intent to sell the investments or whether it is “more likely than not” the Company will be required to sell the investments before the recovery of its amortized cost.

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended
	March 31, 2013			April 1, 2012
Gross realized gains	$	718		$	1,075
Gross realized losses	(1,032		)	(552		)

Fixed income securities by contractual maturity as of March 31, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,307,668	$	1,311,454
After one year through five years	3,022,182		3,050,188
After five years through ten years	151,806		151,812
After ten years	671,737		671,723
Total	$	5,153,393	$	5,185,177

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both March 31, 2013 and December 30, 2012.

	March 31, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	921,007	$	927,319	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	799,628		1,286,500		789,913		1,159,370
Total	$	1,720,635	$	2,213,819	$	1,696,621	$	2,087,190

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Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Revenues	$ 1,340,729	$ 1,205,561
Cost of revenues	799,383	775,320
Amortization of acquisition-related intangible assets	9,830	13,731
Total cost of revenues	809,213	789,051
Gross profit	531,516	416,510
Operating expenses:
Research and development	171,125	140,957
Sales and marketing	59,127	49,035
General and administrative	45,104	32,591
Amortization and write-off of acquisition-related intangible assets	2,369	2,063
Total operating expenses	277,725	224,646
Operating income	253,791	191,864
Interest income	12,905	14,989
Interest (expense) and other income (expense), net	(32,802)	(40,305)
Total other income (expense), net	(19,897)	(25,316)
Income before income taxes	233,894	166,548
Provision for income taxes	67,665	52,163
Net income	$ 166,229	$ 114,385
Net income per share:
Basic	$ 0.69	$ 0.47
Diluted	$ 0.68	$ 0.46
Shares used in computing net income per share:
Basic	242,519	242,883
Diluted	245,577	247,102

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Related Parties and Strategic Investments

3 Months Ended

Mar. 31, 2013

Related Party Transactions [Abstract]

Related Parties and Strategic Investments

Related Parties and Strategic Investments

Flash Ventures with Toshiba. The Company owns 49.9% of each entity within Flash Ventures and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 11, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are variable interest entities. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling $478.9 million and $687.4 million in the three months endedMarch 31, 2013 and April 1, 2012, respectively. The Company received loan repayments from Flash Ventures of $53.6 million and $63.8 million in the three months endedMarch 31, 2013 and April 1, 2012, respectively. At March 31, 2013 and December 30, 2012, the Company had accounts payable balances due to Flash Ventures of $176.4 million and $214.5 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	March 31, 2013		December 30, 2012
Notes receivable	$	696	$	820
Equity investments	590		640
Operating lease guarantees	743		926
Prepayments	21		26
Maximum loss exposure	$	2,050	$	2,412

Solid State Storage Solutions, Inc. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions, Inc. (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a variable interest entity. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Condensed Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	SANDISK CORP
Entity Central Index Key	0001000180
Current Fiscal Year End Date	--12-29
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding	243,368,566
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes

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Litigation

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Litigation

Litigation

From time to time, we are involved in various litigation, including those described below, among others. The litigation proceedings in which we are involved from time to time may include matters such as intellectual property, antitrust, commercial, labor, class action, and insurance disputes. The semiconductor industry is characterized by significant litigation seeking to enforce patent and other intellectual property rights. The Company has enforced and likely will continue to enforce its own intellectual property rights through litigation and related proceedings.

In each case listed below where the Company is the defendant, the Company intends to vigorously defend the action. At this time, the Company does not believe it is reasonably possible that losses related to the litigation described below have occurred beyond the amounts, if any, which have been accrued. However, legal discovery and litigation is highly unpredictable and future legal developments may cause current estimates to change in future periods.

Patent Infringement Litigation With Round Rock Research LLC. On October 27, 2011, in response to infringement allegations by Round Rock Research LLC (“Round Rock”), the Company filed a lawsuit against Round Rock in the U.S. District Court for the Northern District of California. The lawsuit seeks a declaratory judgment that twelve Round Rock patents are invalid and/or not infringed by flash memory products sold by the Company. Round Rock has since withdrawn its allegations of infringement as to three of the patents. SanDisk has filed motions for summary judgment of invalidity directed at two additional Round Rock patents, and Round Rock has filed a motion for summary judgment as to certain affirmative defenses asserted by SanDisk to the counterclaims in this action. These motions are currently pending. A claim construction hearing was held on January 16, 2013. Discovery is underway and expert discovery has not yet commenced in the case.

On May 3, 2012, Round Rock filed an action in the U.S. District Court for the District of Delaware alleging that the Company infringed eleven patents, and subsequently filed an amended complaint alleging that SanDisk’s infringement was willful. The parties agreed to dismiss one patent from this Delaware lawsuit that was also being litigated in the California case described above. Discovery is in its early phases, and the parties are scheduled to exchange claim construction positions on July 19, 2013. Trial is currently scheduled for September 29, 2014.

Ritz Camera Federal Antitrust Class Action. On June 25, 2010, Ritz Camera & Image, LLC (“Ritz”) filed a complaint in the U.S. District Court for the Northern District of California (the “District Court”), alleging that the Company violated federal antitrust law by conspiring to monopolize and monopolizing the market for flash memory products. The lawsuit captioned Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, purports to be on behalf of direct purchasers of flash memory products sold by the Company and joint ventures controlled by the Company from June 25, 2006 through the present. The complaint alleges that the Company created and maintained a monopoly by fraudulently obtaining patents and using them to restrain competition and by allegedly converting other patents for its competitive use. On February 24, 2011, the District Court issued an Order granting in part and denying in part the Company’s motion to dismiss which resulted in Dr. Harari being dismissed as a defendant. On September 19, 2011, the Company filed a petition for permission to file an interlocutory appeal in the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) for the portion of the District Court’s Order denying the Company’s motion to dismiss based on Ritz’s lack of standing to pursue Walker Process antitrust claims. On October 27, 2011, the District Court administratively closed the case pending the Federal Circuit’s ruling on the Company’s petition. On November 20, 2012, the Federal Circuit affirmed the District Court’s order denying SanDisk’s motion to dismiss. On December 2, 2012, the Federal Circuit issued its mandate returning the case to the District Court. Discovery is now open in the District Court. On February 20, 2013, Ritz filed a motion requesting that Albert Giuliano, the Chapter 7 Trustee of the Ritz bankruptcy estate, be substituted as the plaintiff in this case. The Court has not ruled on Ritz’s motion.

Samsung Federal Antitrust Action Against Panasonic and SD-3C. On July 15, 2010, Samsung Electronics Co., Ltd. (“Samsung”) filed an action in the U.S. District Court for the Northern District of California (the “District Court”) alleging various claims against Panasonic Corporation and Panasonic Corporation of North America (collectively, “Panasonic”) and SD-3C, LLC (“SD-3C”) under federal antitrust law pursuant to Sections 1 and 2 of the Sherman Act, and under California antitrust and unfair competition laws relating to the licensing practices and operations of SD-3C. The complaint seeks an injunction against collection of Secure Digital (“SD”) card royalties, treble damages, restitution, pre- and post-judgment interest, costs, and attorneys’ fees, as well as a declaration that Panasonic and SD-3C engaged in patent misuse and that the patents subject to such alleged misuse should be held unenforceable. The Company is not named as a defendant in this case, but it established SD-3C along with Panasonic and Toshiba, and the complaint includes various factual allegations concerning the Company. As a member of SD-3C, the Company may be responsible for a portion of any monetary award. Other requested relief, including an injunction or declaration of patent misuse, could result in a loss of revenue to the Company. Defendants filed a motion to dismiss on September 24, 2010, and Samsung filed a First Amended Complaint (“FAC”) on October 14, 2010. On August 25, 2011, the District Court dismissed the patent misuse claim with prejudice, but gave Samsung leave to amend its other claims. On January 3, 2012, the District Court granted defendants’ motion to dismiss Samsung’s complaint without leave to amend. Samsung has appealed, dated January 25, 2012. The briefing on appeal is complete but a hearing date has not yet been set.

Federal Antitrust Class Action Against SanDisk, et al. On March 15, 2011, a putative class action captioned Oliver v. SD‑3C LLC, et al was filed in the U.S. District Court for the Northern District of California (the “District Court”) on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims against the Company, SD‑3C, Panasonic, Toshiba, and Toshiba America Electronic Components, Inc. under federal antitrust law pursuant to Section 1 of the Sherman Act, California antirust and unfair competition laws, and common law. The complaint seeks an injunction of the challenged conduct, dissolution of “the cooperation agreements, joint ventures and/or cross-licenses alleged herein,” treble damages, restitution, disgorgement, pre- and post-judgment interest, costs, and attorneys’ fees. Plaintiffs allege that the Company (along with the other members of SD‑3C) conspired to artificially inflate the royalty costs associated with manufacturing SD cards in violation of federal and California antitrust and unfair competition laws, which in turn allegedly caused plaintiffs to pay higher prices for SD cards. The allegations are similar to, and incorporate by reference the complaint in the Samsung Electronics Co., Ltd. v. Panasonic Corporation; Panasonic Corporation of North America; and SD‑3C LLC described above. On May 21, 2012, the District Court granted Defendants’ motion to dismiss the complaint with prejudice. Plaintiffs have appealed. Appellate briefing should be completed on June 21, 2013. No date for oral argument has been set.

Insurance Litigation. On November 30, 2012, the Company filed a complaint in the U.S. District Court for the Northern District of California against Zurich American Insurance Company (“Zurich”) for breach of an insurance contract issued by Zurich to the Company (the “Policy”). The action relates to Zurich’s denial of the Company’s claim under the Policy for coverage of losses suffered in connection with a power outage that occurred in December 2010 at the Fab 3 and Fab 4 facilities in Yokkaichi, Japan. The Company is seeking damages in an amount to be proven at trial, but in excess of approximately $60 million, less any applicable deductible, as well as costs and other associated remedies. Zurich filed its answer to the Company’s complaint on December 21, 2012. No trial date has been set.

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Commitments, Contingencies and Guarantees-Indemnity (Details Textual 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Supplier and Customer [Member]
Indemnification
Indemnification Accrual At Carrying Value	$ 0
Officers, Employees and Directors [Member]
Indemnification
Indemnification Accrual At Carrying Value	0	0
Environmental Cost [Member]
Indemnification
Indemnification Accrual At Carrying Value	$ 0

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Consolidated Statements of Comprehensive Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Net income	$ 166,229	$ 114,385
Other Comprehensive Income (Loss), before Tax
Unrealized holding gain (loss) on marketable securities	6,227	8,734
Reclassification adjustment for realized (gain) loss on marketable securities included in net income	314	(523)
Net unrealized holding gain (loss) on marketable securities before taxes	6,541	8,211
Foreign currency translation adjustments	(116,179)	(102,981)
Unrealized holding gain (loss) on derivatives qualifying as cash flow hedges	(30,630)	(69,061)
Reclassification adjustment for realized (gain) loss on derivatives qualifying as cash flow hedges included in net income	1,441	(6,314)
Total other comprehensive income (loss), derivatives qualifying as hedges, before tax	(29,189)	(75,375)
Total other comprehensive income (loss), before tax	(138,827)	(170,145)
Income tax expense (benefit) related to items of other comprehensive income (loss)	(16,258)	(11,202)
Total other comprehensive income (loss), net of tax	(122,569)	(158,943)
Comprehensive income (loss)	$ 43,660	$ (44,558)

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Share Repurchase Program

3 Months Ended

Mar. 31, 2013

Share Repurchase Program [Abstract]

Treasury Stock [Text Block]

Share Repurchase Program

The Company’s Board of Directors has authorized up to $1.25 billion for share repurchases, of which$926.4 million remained available for share repurchases as of March 31, 2013. Under this program, shares repurchased are recorded as a reduction to capital in excess of par value and retained earnings in the Company’s Condensed Consolidated Balance Sheet. From inception of this share repurchase program through March 31, 2013, the Company had repurchased 7.49 million shares for $323.6 million, of which 1.76 million shares for an aggregate purchase price of $89.6 million were repurchased during the three months endedMarch 31, 2013. As part of its share repurchase program, the Company may from time-to-time enter into structured share repurchase arrangements with financial institutions. These arrangements generally require the Company to make an upfront cash payment in exchange for the right to receive shares of its common stock or cash at the expiration of the agreement, dependent upon the volume-weighted average price of the Company’s common stock at the expiration date. The initial cash principal payment, as well as the subsequent repayment of principal and return on principal, if settled in cash, are recorded as a component of capital in excess of par value in the Company’s Condensed Consolidated Balance Sheets.

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Financing Arrangements

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Financing Arrangements

Financing Arrangements

The following table reflects the carrying value of the Company’s convertible debt (in thousands):

	March 31, 2013			December 30, 2012
1% Notes due 2013	$	928,061		$	928,061
Less: Unamortized bond discount	(7,054		)	(21,353		)
Net carrying amount of 1% Notes due 2013	921,007			906,708
1.5% Notes due 2017	1,000,000			1,000,000
Less: Unamortized bond discount	(200,372		)	(210,087		)
Net carrying amount of 1.5% Notes due 2017	799,628			789,913
Total convertible debt	1,720,635			1,696,621
Less: Convertible short-term debt	(921,007		)	(906,708		)
Convertible long-term debt	$	799,628		$	789,913

1% Convertible Senior Notes Due 2013. In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Convertible Senior Notes due May 15, 2013 (the “1% Notes due 2013”) at par and has subsequently repurchased $221.9 million of principal amount of these notes. The 1% Notes due 2013 may be converted, under certain circumstances, based on an initial conversion rate of 12.1426 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $82.36 per share). The net proceeds to the Company from the offering of the 1% Notes due 2013 were $1.13 billion. As of March 31, 2013, the Company had $928.1 million outstanding in aggregate principal amount at par.

The Company separately accounts for the liability and equity components of the 1% Notes due 2013. The principal amount of the liability component of $753.5 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 7.4%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $394.3 million as of March 31, 2013 and December 30, 2012.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1% Notes due 2013 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	2,319	$	2,319
Amortization of bond issuance costs	696		696
Amortization of bond discount	14,058		13,025
Total interest cost recognized	$	17,073	$	16,040

The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for each of the three months endedMarch 31, 2013 and April 1, 2012. The remaining bond discount of $7.1 million as of March 31, 2013 will be amortized over the remaining life of the 1% Notes due 2013, which is approximately 0.1 years.

Concurrent with the issuance of the 1% Notes due 2013, the Company sold warrants to acquire up to approximately 14.0 million shares of its common stock at an exercise price of $95.03 per share. Due to the repurchase of a portion of the outstanding 1% Notes due 2013 in fiscal year 2011, the Company unwound a pro-rata portion of the warrants. The counterparties may now purchase up to approximately 11.3 million shares of the Company’s common stock at an exercise price of $95.03 per share. As of March 31, 2013, the warrants had an expected life of approximately 0.4 years and will expire on 20 different dates from August 23, 2013 through September 20, 2013. At expiration, the Company may, at its option, elect to settle the warrants on a net share basis. As of March 31, 2013, the remaining warrants had not been exercised and remain outstanding. In addition, at issuance, counterparties agreed to sell to the Company up to approximately 14.0 million shares of its common stock, which is the number of shares initially issuable upon conversion of the 1% Notes due 2013 in full, at a conversion price of $82.36 per share. Due to the repurchase of a portion of the outstanding 1% Notes due 2013 in fiscal year 2011, the Company unwound a pro-rata portion of the convertible bond hedge. The Company may now purchase up to approximately 11.3 million shares of its common stock at a conversion price of $82.36 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1% Notes due 2013 or the first day that none of the 1% Notes due 2013 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by it upon conversion of the 1% Notes due 2013. As of March 31, 2013, the Company had not purchased any shares under the remaining convertible bond hedge agreement.

1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (the “1.5% Notes due 2017”) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below, based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from the sale of the 1.5% Notes due 2017 were $981.0 million.

The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the date of the issuance for a similar debt instrument without the conversion feature. The carrying value of the equity component was $294.0 million as of March 31, 2013, unchanged from the date of issuance.

The following table presents the amount of interest cost recognized relating to the contractual interest coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of the 1.5% Notes due 2017 (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Contractual interest coupon	$	3,750	$	3,750
Amortization of bond issuance costs	667		667
Amortization of bond discount	9,519		8,861
Total interest cost recognized	$	13,936	$	13,278

The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each of the three months endedMarch 31, 2013 and April 1, 2012. The remaining unamortized bond discount of $200.4 million as of March 31, 2013 will be amortized over the remaining life of the 1.5% Notes due 2017, which is approximately 4.4 years.

Concurrent with the issuance of the 1.5% Notes due 2017, the Company sold warrants to acquire up to approximately 19.1 million shares of its common stock at an exercise price of $73.33 per share. As of March 31, 2013, the warrants had an expected life of approximately 4.7 years and will expire on 40 different dates from November 13, 2017 through January 10, 2018. At each expiration date, the Company may, at its option, elect to settle the warrants on a net share basis. As of March 31, 2013, the warrants had not been exercised and remain outstanding. In addition, counterparties agreed to sell to the Company up to approximately 19.1 million shares of the Company’s common stock, which is the number of shares initially issuable upon conversion of the 1.5% Notes due 2017 in full, at a price of $52.37 per share. This convertible bond hedge transaction will be settled in net shares and will terminate upon the earlier of the maturity date of the 1.5% Notes due 2017 or the first day that none of the 1.5% Notes due 2017 remain outstanding due to conversion or otherwise. Settlement of the convertible bond hedge in net shares on the expiration date would result in the Company receiving net shares equivalent to the number of shares issuable by the Company upon conversion of the 1.5% Notes due 2017. As of March 31, 2013, the Company had not purchased any shares under this convertible bond hedge agreement.

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Balance Sheet Information (Tables)

3 Months Ended

Mar. 31, 2013

Balance Sheet Information [Abstract]

Accounts Receivable from Product Revenues, net

Accounts receivable, net, was as follows (in thousands):

	March 31, 2013			December 30, 2012
Accounts receivable from product revenues	$	584,698		$	766,583
Accounts receivable from license and royalty revenues	—			37,638
Allowance for doubtful accounts	(6,377		)	(6,627		)
Price protection, promotions and other activities	(138,825		)	(171,569		)
Total accounts receivable, net	$	439,496		$	626,025

Inventory

Inventory was as follows (in thousands):

	March 31, 2013		December 30, 2012
Raw material	$	389,004	$	404,634
Work-in-process	126,874		102,249
Finished goods	218,059		243,192
Total inventory	$	733,937	$	750,075

Other Current Assets

Other current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Tax-related receivables	$	177,942	$	186,223
Other non-trade receivable	35,130		—
Prepayment to Flash Forward Ltd.	20,577		20,577
Derivative contract receivables	14,937		19,064
Prepaid expenses	11,835		13,221
Other current assets	12,336		21,794
Total other current assets	$	272,757	$	260,879

Notes Receivable and Investments in the Flash Ventures with Toshiba

Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):

	March 31, 2013		December 30, 2012
Notes receivable, Flash Partners Ltd.	$	164,701	$	180,254
Notes receivable, Flash Alliance Ltd.	382,531		476,800
Notes receivable, Flash Forward Ltd.	148,762		162,810
Investment in Flash Partners Ltd.	213,027		232,547
Investment in Flash Alliance Ltd.	315,453		342,048
Investment in Flash Forward Ltd.	61,599		65,653
Total notes receivable and investments in Flash Ventures	$	1,286,073	$	1,460,112

Other Noncurrent Assets

Other non-current assets were as follows (in thousands):

	March 31, 2013		December 30, 2012
Prepaid tax onintercompany transactions	$	41,025	$	42,118
Prepayment to Flash Forward Ltd.	—		5,144
Convertible note issuance costs	8,237		8,708
Long-term prepaid income tax	63,008		63,008
Other non-current assets	35,898		34,832
Total other non-current assets	$	148,168	$	153,810

Other Current Accrued Liabilities

Other current accrued liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Accrued payroll and related expenses	$	97,458	$	102,269
Derivative contract payables	34,821		13,584
Taxes payable	27,565		25,476
Other accrued liabilities	136,333		116,210
Total other current accrued liabilities	$	296,177	$	257,539

Non Current liabilities

Non-current liabilities were as follows (in thousands):

	March 31, 2013		December 30, 2012
Deferred tax liabilities	$	16,753	$	28,672
Income tax liabilities	204,533		208,629
Deferred credits on intercompany transactions	54,348		58,548
Other non-current liabilities	108,323		112,098
Total non-current liabilities	$	383,957	$	407,947

Schedule of Product Warranty Liability

The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Condensed Consolidated Balance Sheets and the activity was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Balance, beginning of period	$	38,787		$	26,957
Additions and adjustments to cost of revenues	4,878			10,406
Usage	(4,693		)	(5,244		)
Balance, end of period	$	38,972		$	32,119

Schedule of Accumulated Other Comprehensive Income (Loss)

AOCI presented in the accompanying Condensed Consolidated Balance Sheets consists of unrealized gains and losses on available-for-sale investments, foreign currency translation and hedging activities, net of tax, for all periods presented (in thousands):

	March 31, 2013			December 30, 2012
Accumulated net unrealized gain (loss) on:
Available-for-sale investments	$	20,407		$	15,919
Foreign currency translation	57,521			155,389
Hedging activities	(35,376		)	(6,187		)
Total accumulated other comprehensive income	$	42,552		$	165,121

Allocation Of Amount Of Income Tax Benefit Expense

The amount of income tax (benefit) expense allocated to the unrealized gain (loss) on available-for-sale investments and foreign currency translation was as follows (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Available-for-sale investments	$	2,053		$	2,993
Foreign currency translation	(18,311		)	(14,195		)
	$	(16,258	)	$	(11,202	)

Reclassification Of Accumulated Other Comprehensive Income Amounts

The significant amounts reclassified out of each component of AOCI were as follows (in thousands):

	Three months ended
AOCI Component	March 31, 2013			April 1, 2012			Income Statement Line Item
Unrealized gain (loss) on available-for-sale investments	$	(314	)	$	523		Interest (expense) and other income (expense), net
	(175		)	(169		)	Tax expense
	(489		)	354			Net of tax
Gain (loss) on hedging activities:
Foreign exchange contracts	(1,441		)	6,314			Cost of revenues
	—			—			Tax expense
	(1,441		)	6,314			Net of tax
Total reclassifications for the period	$	(1,930	)	$	6,668		Net of tax

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Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Operations

Organization and Nature of Operations. The Company was incorporated in Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using our flash memory, controller and firmware technologies. The Company operates in one segment, flash memory storage products.

Basis of Presentation

Basis of Presentation. The Company’s fiscal year ends on the Sunday closest to December 31, and its fiscal quarters consist of 13 weeks and generally end on the Sunday closest to March 31, June 30, and September 30. The first quarters of fiscal years 2013 and 2012 ended on March 31, 2013 and April 1, 2012, respectively. For accounting and disclosure purposes, the exchange rates of 94.11, 85.99 and 82.25 at March 31, 2013, December 30, 2012 and April 1, 2012, respectively, were used to convert Japanese yen to U. S. dollars. Certain prior period amounts have been reclassified in the financial statements and footnotes to conform to the current period presentation, including line items within current assets in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Cash Flows and in Note 4, “Balance Sheet Information.” Beginning in the first quarter of fiscal year 2013, the Company reports only total revenues, which include product revenues and license and royalty revenues. Throughout the Notes to Condensed Consolidated Financial Statements, unless otherwise indicated, references to Net income refer to Net income attributable to common stockholders.

Consolidation, Policy

Principles of Consolidation. The Condensed Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries. All intercompany balances and transactions have been eliminated. Non-controlling interests represents the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries. The Condensed Consolidated Financial Statements also include the results of companies acquired by the Company from the date of each acquisition.

Use of Estimates

Use of Estimates. The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. The estimates and judgments affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to customer programs and incentives, intellectual property claims, product returns, allowance for doubtful accounts, inventories and inventory reserves, valuation and impairments of marketable securities and investments, impairments of goodwill and long-lived assets, income taxes, warranty obligations, restructurings, contingencies, share-based compensation and litigation. The Company bases estimates on historical experience and on other assumptions that its management believes are reasonable under the circumstances. These estimates form the basis for making judgments about the carrying value of assets and liabilities when those values are not readily apparent from other sources. Actual results could materially differ from these estimates.

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Related Parties and Strategic Investments (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012	Dec. 30, 2012
Related Parties and Strategic Investments
Accounts payable balances due to related party	$ 176,905,000		$ 214,806,000
Flash Ventures [Member]
Related Parties and Strategic Investments
The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures	478,900,000	687,400,000
Repayment of loan from Flash Ventures	53,600,000	63,800,000
Accounts payable balances due to related party	$ 176,400,000		$ 214,500,000
Flash Ventures [Member] | SanDisk Corp [Member]
Related Parties and Strategic Investments
Percentage of ownership with Related party	49.90%

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Net Income Per Share

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Net Income Per Share

Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

	Three months ended
	March 31, 2013		April 1, 2012
Numerator for basic net income per share:
Net income	$	166,229	$	114,385
Denominator for basic net income per share:
Weighted average common shares outstanding	242,519		242,883
Basic net income per share	$	0.69	$	0.47
Numerator for diluted net income per share:
Net income	$	166,229	$	114,385
Denominator for diluted net income per share:
Weighted average common shares outstanding	242,519		242,883
Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs	3,058		4,219
Shares used in computing diluted net income per share	245,577		247,102
Diluted net income per share	$	0.68	$	0.46
Anti-dilutive shares excluded from net income per share calculation	68,296		68,352

Basic earnings per share exclude any dilutive effects of stock options, SARs, RSUs, warrants and convertible debt. Diluted earnings per share include the dilutive effects of stock options, SARs, RSUs and ESPP. Certain common stock issuable under stock options, SARs, warrants, the 1% Notes due 2013 and the 1.5% Notes due 2017 have been omitted from the diluted net income per share calculation because their inclusion is considered anti-dilutive.

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Financing Arrangments-Interest (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
1% Sr. Convertible Notes due 2013 [Member]
Interest Cost Recognized For Convertible Notes
Contractual interest coupon	$ 2,319	$ 2,319
Amortization of bond issuance costs	696	696
Amortization of bond discount	14,058	13,025
Total interest cost recognized	17,073	16,040
1.5% Sr. Convertible Notes due 2017 [Member]
Interest Cost Recognized For Convertible Notes
Contractual interest coupon	3,750	3,750
Amortization of bond issuance costs	667	667
Amortization of bond discount	9,519	8,861
Total interest cost recognized	$ 13,936	$ 13,278

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Share-Based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-based Compensation

Share-based Plans. The Company has a share-based compensation program that provides its Board of Directors with broad discretion in creating equity incentives for employees, officers, non-employee board members and non-employee service providers. This program includes incentive and non-statutory stock option awards, stock appreciation right awards, restricted stock awards, performance-based cash bonus awards for Section 16 executive officers and an automatic grant program for non-employee board members pursuant to which such individuals will receive option grants or other stock awards at designated intervals over their period of board service. These awards are granted under various programs, all of which are stockholder approved. Stock option awards generally vest as follows: 25% of the shares vest on the first anniversary of the vesting commencement date and the remaining 75% vest proportionately each quarter over the next 12 quarters of continued service. Restricted stock unit awards generally vest in equal annual installments over a 4-year period. Initial grants to non-employee board members under the automatic grant program vest in equal annual installments over a 4-year period and subsequent grants to non-employee board members generally vest over a 1-year period in accordance with the specific vesting provisions set forth in that program. Additionally, the Company has an Employee Stock Purchase Plan (“ESPP”) that allows employees to purchase shares of common stock at 85% of the fair market value at the subscription date or the date of purchase, whichever is lower.

Valuation Assumptions

Option Plan Shares. The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.38	0.43
Risk-free interest rate	0.67%	0.62%
Expected term	4.4 years	4.3 years
Estimated annual forfeiture rate	8.59%	8.57%
Weighted average fair value at grant date	$16.46	$17.09

Employee Stock Purchase Plan Shares. The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.33	0.38
Risk-free interest rate	0.13%	0.15%
Expected term	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24

Share-based Compensation Plan Activities

Stock Options and SARs. A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of March 31, 2013 and changes during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	910		51.38
Exercised	(2,942	)	32.29			55,870
Forfeited	(113	)	42.77
Expired	(2,169	)	60.94
Options and SARs outstanding at March 31, 2013	11,112		39.87		4.0	168,991
Options and SARs vested and expected to vest after March 31, 2013, net of forfeitures	10,589		39.51		3.9	164,943
Options and SARs exercisable at March 31, 2013	6,435		35.84		2.9	124,402

At March 31, 2013, the total compensation cost related to stock options granted to employees under the Company’s share-based compensation plans but not yet recognized was approximately $70.9 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average period of approximately 2.6 years. As of March 31, 2013, the Company had fully expensed all of its SARs awards.

Restricted Stock Units. Restricted stock units (“RSUs”) are settled in shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. The cost of these awards is determined using the fair value of the Company’s common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite vesting period.

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	1,839		51.50
Vested	(697	)	42.83		35,026
Forfeited	(68	)	43.81
Non-vested share units at March 31, 2013	4,151		47.18		195,851

As of March 31, 2013, the Company had approximately $151.9 million of unrecognized compensation expense, net of estimated forfeitures, related to RSUs, which will be recognized over a weighted average estimated remaining life of 3.1 years.

Employee Stock Purchase Plan. At March 31, 2013, there was approximately $2.8 million of total unrecognized compensation cost related to the Company’s ESPP that is expected to be recognized over a period of approximately 0.4 years.

Share-based Compensation Expense. The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	1,717		$	1,537
Research and development	11,640			10,027
Sales and marketing	3,871			3,629
General and administrative	4,506			3,887
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911
Share-based compensation expense by type of award:
Stock options and SARs	$	8,269		$	9,216
RSUs	11,970			7,894
ESPP	1,495			1,970
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911

Share-based compensation expense of $2.4 million and $1.8 million related to manufacturing personnel was capitalized into inventory as of March 31, 2013 and December 30, 2012, respectively.

The total grant date fair value of options and RSUs vested during the three months ended March 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Fair value of options vested	$	14,568	$	14,760
Fair value of RSUs vested	29,821		19,301
Total fair value of options and RSUs vested	$	44,389	$	34,061

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Income Taxes

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Provision for Income Taxes

Provision for Income Taxes

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended
	March 31, 2013			April 1, 2012
Provision for income taxes	$	67,665		$	52,163
Effective tax rate	28.9		%	31.3		%

The provision for income taxes for the three months endedMarch 31, 2013 differs from the U.S. statutory tax rate primarily due to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain share-based compensation, federal research and development (“R&D”) credit and tax-exempt interest income. Earnings and taxes resulting from foreign operations are largely attributable to the Company’s Irish, Chinese, Israeli and Japanese entities. The lower effective tax rate for the three months endedMarch 31, 2013 compared to the same period in fiscal year 2012 is attributable to a retroactively extended federal R&D tax credit for fiscal year 2012, availability of a federal R&D credit in fiscal year 2013 and changes in the composition of operating income by tax jurisdiction. As of March 31, 2013, the Company believes that most of its deferred tax assets are more likely than not to be realized, except for certain loss and credit carry forwards in certain U.S. and foreign tax jurisdictions.

Unrecognized tax benefits were $176.2 million and $179.5 million as of March 31, 2013 and December 30, 2012, respectively. Unrecognized tax benefits that would impact the effective tax rate in the future were approximately $83.2 million at March 31, 2013. Income tax expense for the first quarter of fiscal years 2013 and 2012 included interest and penalties of $0.7 million and $0.8 million, respectively.

The Company is subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In February 2012, the Internal Revenue Service (“IRS”) completed its field audit of the Company’s federal income tax returns for the years 2005 through 2008 and issued the Revenue Agent’s Report.  The most significant proposed adjustments are comprised of related party transactions between SanDisk Corporation and its foreign subsidiaries.  The Company is contesting these adjustments through the IRS Appeals Office and cannot predict when a resolution will be reached.

The Company strongly believes the IRS’s position regarding the intercompany transactions is inconsistent with applicable tax laws, judicial precedents and existing Treasury regulations, and that the Company’s previously reported income tax provisions for the years in question are appropriate.  The Company believes that an adequate provision has been made for the adjustments from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner that is not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

The IRS recently initiated an examination of the Company’s federal income tax returns for fiscal years 2009 through 2011. The Company does not expect a resolution of this audit to be reached during the next twelve months. In addition, the Company is currently under audit by various state and international tax authorities. The Company cannot reasonably estimate the outcome of these examinations, or provide assurance that the outcome of these examinations will not materially harm the Company’s financial position, results of operations or liquidity.

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Commitments, Contingencies and Guarantees

3 Months Ended

Mar. 31, 2013

Commitments Contingencies and Guarantees [Abstract]

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

Flash Ventures

Flash Ventures, the Company’s business ventures with Toshiba Corporation (“Toshiba”), consists of three separate legal entities: Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. The Company has a 49.9%ownership interest in each of these entities and Toshiba owns 50.1% of each of these entities. Through these ventures, the Company and Toshiba have collaborated in the development and manufacture of NAND flash memory products which are manufactured by Toshiba at its wafer fabrication facility located in Yokkaichi, Japan, using semiconductor manufacturing equipment owned or leased by Flash Ventures. Flash Ventures purchases wafers from Toshiba at cost and then resells those wafers to the Company and Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in each Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment obligation beyond its rolling three-month purchase commitment because the price is determined by reference to the future cost of producing the semiconductor wafers. In addition, the Company is committed to fund 49.9% of Flash Ventures’ costs to the extent that Flash Ventures’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.

Flash Partners. Flash Partners Ltd. (“Flash Partners”) was formed in fiscal year 2004. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 3”) located in Yokkaichi, Japan. As of March 31, 2013, the Company had notes receivable from Flash Partners of $164.7 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The Company also has guarantee obligations to Flash Partners; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the Company had an equity investment in Flash Partners of $213.0 million and $232.5 million, respectively, denominated in Japanese yen, offset by $39.3 million and $59.3 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three months endedMarch 31, 2013 and April 1, 2012, the Company recorded a basis adjustment of $0.3 million and $1.3 million, respectively, to its equity in earnings from Flash Partners related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Partners.

Flash Alliance. Flash Alliance Ltd. (“Flash Alliance”) was formed in fiscal year 2006. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 4”) located in Yokkaichi, Japan. As of March 31, 2013, the Company had notes receivable from Flash Alliance of $382.5 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The Company also has guarantee obligations to Flash Alliance; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the Company had an equity investment in Flash Alliance of $315.5 million and $342.0 million, respectively, denominated in Japanese yen, offset by $24.1 million and $53.7 million, respectively, of cumulative translation adjustments recorded in AOCI. In the three months endedMarch 31, 2013 and April 1, 2012, the Company recorded a basis adjustment of $2.9 million and $4.0 million, respectively, to its equity earnings from Flash Alliance related to the difference between the basis in the Company’s equity investment compared to the historical basis of the assets recorded by Flash Alliance.

Flash Forward. Flash Forward Ltd. (“Flash Forward”) was formed in fiscal year 2010. NAND flash memory products provided to the Company by this venture are manufactured by Toshiba at its 300-millimeter wafer fabrication facility (“Fab 5”) located in Yokkaichi, Japan. Fab 5 is to be built in two phases. As of March 31, 2013, the Phase 1 build-out had been completed and was equipped to a portion of the potential equipment capacity. The Company had invested in 50% of that equipment. No commitment has yet been made for further Phase 1 capacity expansion beyond productivity improvements; however, the Company periodically reviews the timeline of further Phase 1 capacity expansion. Furthermore, no timelines have been finalized for the construction of Phase 2. If and when Phase 2 is built, the Company is committed to 50% of the initial ramp in Phase 2, similar to that in Phase 1. On completion of Phase 2, Fab 5 is expected to be of similar size to Toshiba’s Fab 4. The Company and Toshiba will each retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output allocation will be in accordance with each party’s proportionate level of equipment funding.

As of March 31, 2013, the Company had notes receivable from Flash Forward of $148.8 million, denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Forward with the note proceeds. The Company also has guarantee obligations to Flash Forward; see “Off-Balance Sheet Liabilities.” At March 31, 2013 and December 30, 2012, the Company had an equity investment in Flash Forward of $61.6 million and $65.7 million, respectively, denominated in Japanese yen, offset by ($9.4) million and ($3.7) million, respectively, of cumulative translation adjustments recorded in AOCI.

Toshiba Foundry.  In the first quarter of fiscal year 2013, the Company concluded its foundry arrangement with Toshiba.

Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled. These outstanding purchase commitments are included as part of the total “Noncancelable production purchase commitments” in the “Contractual Obligations” table.

Off-Balance Sheet Liabilities

Flash Ventures. Flash Ventures sells and leases back from a consortium of financial institutions (“lessors”) a portion of its tools and has entered into equipment master lease agreements totaling 262.6 billion Japanese yen, or approximately $2.79 billion based upon the exchange rate at March 31, 2013. As of March 31, 2013, the total amount outstanding from these master leases was 139.9 billion Japanese yen, or approximately $1.49 billion based upon the exchange rate at March 31, 2013, of which the amount of the Company’s guarantee obligation of the Flash Ventures’ master lease agreements, which reflects future payments and any lease adjustments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

The master lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, the master lease agreements contain an acceleration clause for certain events of default related to the Company as guarantor, including, among other things, the Company’s failure to maintain a minimum stockholders’ equity of at least $1.51 billion, and for some of the leases, the Company’s failure to maintain a minimum corporate rating of BB- from Standard & Poors (“S&P”) or Moody’s Corporation (“Moody’s”), or a minimum corporate rating of BB+ from Rating & Investment Information, Inc. (“R&I”). As of March 31, 2013, Flash Ventures was in compliance with all of its master lease covenants. As of March 31, 2013, the Company’s R&I credit rating was BBB, two notches above the required minimum corporate rating threshold from R&I; and the Company’s S&P credit rating was BB, one notch above the required minimum corporate rating threshold from S&P. If both S&P and R&I were to downgrade the Company’s credit rating below the minimum corporate rating threshold, the Company’s stockholders’ equity falls below $1.51 billion, or other events of default occur, Flash Ventures would become non-compliant under its master equipment lease agreements and would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under such agreements. Such resolution could include, among other things, supplementary security to be supplied by the Company, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional collateral or financial consideration under the circumstances. If a non-compliance event were to occur and if the Company failed to reach a resolution, the Company could be required to pay a portion or the entire outstanding lease obligations covered by its guarantees under such Flash Ventures master lease agreements.

The following table details the Company’s portion of the remaining guarantee obligations under each of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen and U.S. dollar equivalent based upon the exchange rate at March 31, 2013.

Master Lease Agreements by Execution Date	Lease Type	Lease Amounts				Expiration
		(Yen in billions)		(Dollars in thousands)
Flash Partners
April 2010	Refinanced	¥	1.3	$	14,320	2014
January 2011	Refinanced	6.1		64,984		2014
November 2011	Refinanced	2.2		23,111		2014
March 2012	Refinanced	3.9		41,077		2015
		13.5		143,492
Flash Alliance
June 2008	Original	9.1		96,867		2013
March 2012	Original	8.0		85,367		2017
July 2012	Refinanced	15.2		160,736		2017
		32.3		342,970
Flash Forward
November 2011	Original	13.1		139,886		2016
March 2012	Original	8.0		85,217		2017
July 2012	Original	3.0		31,612		2017
		24.1		256,715
Total guarantee obligations		¥	69.9	$	743,177

The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the master lease agreements, in annual installments as of March 31, 2013 in U.S. dollars based upon the yen/dollar exchange rate at March 31, 2013 (in thousands).

Annual Installments	Payment of Principal Amortization		Purchase Option Exercise Price at Final Lease Terms		Guarantee Amount
Year 1	$	154,103	$	88,197	$	242,300
Year 2	155,389		49,040		204,429
Year 3	105,202		12,152		117,354
Year 4	72,340		61,233		133,573
Year 5	19,261		26,260		45,521
Total guarantee obligations	$	506,295	$	236,882	$	743,177

Guarantees

Indemnification Agreements. The Company has agreed to indemnify suppliers and customers for alleged patent infringement. The scope of such indemnity varies, but may, in some instances, include indemnification for damages and expenses, including attorneys’ fees. The Company may periodically engage in litigation as a result of these indemnification obligations. The Company’s insurance policies exclude coverage for third-party claims for patent infringement. Although the liability is not remote, the nature of the patent infringement indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay to its suppliers and customers. Historically, the Company has not made any significant indemnification payments under any such agreements. As of March 31, 2013, no amounts had been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

As permitted under Delaware law and the Company’s certificate of incorporation and bylaws, the Company has agreements, or has assumed agreements in connection with its acquisitions, whereby it indemnifies certain of its officers and employees, and each of its directors for certain events or occurrences while the officer, employee or director is, or was, serving at the Company’s or the acquired company’s request in such capacity. The term of the indemnification period is for the officer’s, employee’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is generally unlimited; however, the Company has a Director and Officer insurance policy that may reduce its exposure and enable it to recover all or a portion of any future amounts paid. As a result of its insurance coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. The Company has no liabilities recorded for these agreements as of March 31, 2013 or December 30, 2012, as these liabilities are not reasonably estimable even though liabilities under these agreements are not remote.

The Company and Toshiba have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company and Toshiba have also entered into a Patent Indemnification Agreement under which, in many cases, the Company will share in the expenses associated with the defense and cost of settlement associated with such claims. This agreement provides limited protection for the Company against third-party claims that NAND flash memory products manufactured and sold by Flash Ventures infringe third-party patents. The Company has not made any indemnification payments under any such agreements. As of March 31, 2013, no amounts have been accrued in the accompanying Condensed Consolidated Financial Statements with respect to these indemnification guarantees.

Contractual Obligations and Off-Balance Sheet Arrangements

The following tables summarize the Company’s contractual cash obligations, commitments and off-balance sheet arrangements at March 31, 2013, and the effect such obligations are expected to have on its liquidity and cash flows in future periods.

Contractual Obligations. Contractual cash obligations and commitments as of March 31, 2013 are as follows (in thousands):

	Total			1 Year or Less (Remaining 9 months in Fiscal 2013)		2 –3 Years (Fiscal 2014 and 2015)		4 –5 Years (Fiscal 2016 and 2017)		More than 5 Years (Beyond Fiscal 2017)
Facility and other operating leases	$	12,257	(5)	$	3,911	$	7,277	$	1,069	$	—
Flash Partners (1)	527,765		(5)(6)	149,550		247,403		103,328		27,484
Flash Alliance (1)	1,547,797		(5)(6)	286,035		843,078		302,913		115,771
Flash Forward (1)	612,374		(5)(6)	179,225		265,307		140,319		27,523
Toshiba research and development	84,851		(5)	54,851		30,000		—		—
Capital equipment purchase commitments	55,189			55,029		127		33		—
1% Convertible senior notes principal and interest (2)	932,701			932,701		—		—		—
1.5% Convertible senior notes principal and interest (3)	1,067,500			7,500		30,000		1,030,000		—
Operating expense commitments	63,247			59,542		3,705		—		—
Noncancelable production purchase commitments (4)	261,325		(5)	261,325		—		—		—
Total contractual cash obligations	$	5,165,006		$	1,989,669	$	1,426,897	$	1,577,662	$	170,778

————

⁽¹⁾  Includes reimbursement for depreciation and lease payments on owned and committed equipment, funding commitments for loans and equity investments and reimbursement for other committed expenses. Funding commitments assume no additional operating lease guarantees; new operating lease guarantees can reduce funding commitments.

⁽²⁾  In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Notes due 2013. The Company will pay cash interest on the outstanding notes at an annual rate of 1.0%, payable semi-annually on May 15 and November 15 of each year until May 15, 2013. In fiscal year 2011, the Company redeemed $221.9 million of the outstanding notes.

⁽³⁾  In August 2010, the Company issued and sold $1.0 billion in aggregate principal amount of 1.5% Notes due 2017. The Company will pay cash interest on the outstanding notes at an annual rate of 1.5%, payable semi-annually on August 15 and February 15 of each year until August 15, 2017.

⁽⁴⁾  Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments.

⁽⁵⁾  Includes amounts denominated in a currency other than the U.S. dollar, which are subject to fluctuation in exchange rates prior to payment and have been translated using the exchange rate at March 31, 2013.

⁽⁶⁾  Excludes amounts related to the master lease agreements’ purchase option exercise price at final lease term.

The Company has excluded $204.5 million of unrecognized tax benefits (which includes penalties and interest) from the contractual obligation table above due to the uncertainty with respect to the timing of associated future cash flows at March 31, 2013. The Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities.

Off-Balance Sheet Arrangements. Off-balance sheet arrangements are as follows (in thousands):

	March 31, 2013
Guarantee of Flash Ventures equipment leases (1)	$	743,177

————

⁽¹⁾  The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

The Company leases many of its office facilities and operating equipment for various terms under long-term, noncancelable operating lease agreements. The leases expire at various dates from fiscal year 2013 through fiscal year 2017. Future minimum lease payments are presented below (in thousands):

	March 31, 2013
Fiscal year:
2013 (remaining nine months)	$	4,299
2014	4,593
2015	3,789
2016	1,211
2017	4
	13,896
Sublease income to be received in the future under noncancelable subleases	(1,639		)
Net operating leases	$	12,257

Net rent expense was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Rent expense, net	$	1,843	$	1,113

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Share-Based Compensation-Option Rollforward (Details 2) (Employee Stock Option [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2013	Dec. 30, 2012
Employee Stock Option [Member]
Stock options and stock appreciation rights
Options and SARs outstanding Beginning Balance, Shares	15,426
Options and SARs outstanding Beginning Balance, Weighted Average Exercise Price (per share)	$ 40.73
Options and SARs outstanding Beginning Balance, Weighted Average Remaining Contractual Term	4 years 0 months	3 years 2 months
Options and SARs outstanding Beginning Balance, Aggregate Intrinsic Value	$ 109,411
Granted, Shares	910
Granted Weighted Average Exercise Price (per share)	$ 51.38
Exercised, Shares	(2,942)
Exercised Weighted Average Exercise Price (per share)	$ 32.29
Exercised Aggregate Intrinsic Value	55,870
Forfeited, Shares	(113)
Forfeited Weighted Average Exercise Price (per share)	$ 42.77
Expired, Shares	(2,169)
Expired Weighted Average Exercise Price (per share)	$ 60.94
Options and SARs outstanding Ending Balance, shares	11,112	15,426
Options and SARs outstanding Ending Balance, Weighted Average Exercise Price (per share)	$ 39.87	$ 40.73
Options and SARs outstanding Ending Balance, Weighted Average Remaining Contractual Term	4 years 0 months	3 years 2 months
Options and SARs outstanding Ending Balance, Aggregate Intrinsic Value	168,991	109,411
Stock options and stock appreciation rights, expected to vest
Options and SARs vested and expected to vest, net of forfeitures, Shares	10,589
Options and SARs vested and expected to vest, net of forfeitures,Weighted Average Exercise Price (per share)	$ 39.51
Options and SARs vested and expected to vest, net of forfeitures, Weighted Average Remaining Contractual Term	3 years 11 months
Options and SARs vested and expected to vest, net of forfeitures, Aggregate Intrinsic Value	164,943
Stock options and stock appreciation rights, exercisable
Options and SARs, Exercisable, Number	6,435
Options and SARs, Exercisable, Weighted Average Exercise Price	$ 35.84
Options and SARs, Exercisable, Weighted Average Remaining Contractual Term	2 years 11 months
Options and SARs, Exercisable, Intrinsic Value	$ 124,402

XML

Share-Based Compensation-Expense Recognition (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 21,734	$ 19,080
Total tax benefit recognized	(6,916)	(5,169)
Decrease in net income	14,818	13,911
Stock options and SARs [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	8,269	9,216
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	11,970	7,894
Employee Stock Purchase Plan Shares [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	1,495	1,970
Cost of product revenues [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	1,717	1,537
Research and Development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	11,640	10,027
Sales and marketing [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	3,871	3,629
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs
Share-based compensation expense	$ 4,506	$ 3,887

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Share-Based Compensation-Valuation Parameters (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Employee Stock Option [Member]
Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees
Dividend yield	0.00%	0.00%
Expected volatility	38.00%	43.00%
Risk-free interest rate	0.67%	0.62%
Expected term	4 years 5 months	4 years 4 months
Estimated annual forfeiture rate	8.59%	8.57%
Weighted average fair value at grant date	$ 16.46	$ 17.09
Employee Stock Purchase Plan Shares [Member]
Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees
Dividend yield	0.00%	0.00%
Expected volatility	33.00%	38.00%
Risk-free interest rate	0.13%	0.15%
Expected term	0 years 6 months	0 years 6 months
Weighted average fair value at grant date	$ 12.54	$ 12.24

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Investments and Fair Value Measurements-Fin Assets and Liabilities 2 (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013		Dec. 30, 2012
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	$ 2,162,073		$ 1,880,034
Long-term marketable securities	2,882,710		2,835,931
Total financial assets	5,995,327		5,548,126
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	34,821		13,584
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	860,953		610,129
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0		0
Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	5,134,374		4,937,997
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	34,821		13,584
Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Total financial assets	0		0
Financial Liabilities measured at fair value on a recurring basis
Total financial liabilities	0		0
Other Current and Noncurrent Liabilities [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	34,821		13,584
Other Current and Noncurrent Liabilities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	0		0
Other Current and Noncurrent Liabilities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	34,821		13,584
Other Current and Noncurrent Liabilities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial Liabilities measured at fair value on a recurring basis
Other current accrued liabilities and non-current liabilities	0		0
Cash Equivalents [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	935,607	[1]	812,103	[1]
Cash Equivalents [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	815,213	[1]	582,743	[1]
Cash Equivalents [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	120,394	[1]	229,360	[1]
Cash Equivalents [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Cash equivalents	0	[1]	0	[1]
Short-term marketable securities [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	2,162,073		1,880,034
Short-term marketable securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	43,435		16,589
Short-term marketable securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	2,118,638		1,863,445
Short-term marketable securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Short-term marketable securities	0		0
Long term Marketable Securities [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	2,882,710		2,835,931
Long term Marketable Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	2,305		10,797
Long term Marketable Securities [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	2,880,405		2,825,134
Long term Marketable Securities [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Long-term marketable securities	0		0
Other Current and Non-Current Assets [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	14,937		20,058
Other Current and Non-Current Assets [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	0		0
Other Current and Non-Current Assets [Member] | Significant Other Observable Inputs (Level 2) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	14,937		20,058
Other Current and Non-Current Assets [Member] | Significant Unobservable Inputs (Level 3) [Member]
Financial assets measured at fair value on a recurring basis
Other current assets and other non-current assets	$ 0		$ 0

[1] Cash equivalents exclude cash of $212.5 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012, respectively.

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Balance Sheet Information-Warranty (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Movement in Standard Product Warranty Accrual [Roll Forward]
Product Warranty Accrual, beginning of period	$ 38,787	$ 26,957
Additions and adjustments to cost of revenues	4,878	10,406
Usage	(4,693)	(5,244)
Product Warranty Accrual, end of period	$ 38,972	$ 32,119

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Investments and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of Available-for-sale Securities

Cash and Cash Equivalents and Marketable Securities

The Company’s total cash, cash equivalents and marketable securities was as follows (in thousands):

	March 31, 2013		December 30, 2012
Cash and cash equivalents	$	1,148,110	$	995,470
Short-term marketable securities	2,162,073		1,880,034
Long-term marketable securities	2,882,710		2,835,931
Total cash, cash equivalents and marketable securities	$	6,192,893	$	5,711,435

Financial assets and liabilities measured at fair value on a recurring basis

Financial assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following types of instruments (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Money market funds	$	795,213	$	—	$	—	$	795,213	$	582,743	$	—	$	—	$	582,743
Fixed income securities	65,740		5,119,437		—		5,185,177		27,386		4,917,939		—		4,945,325
Derivative assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Derivative liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

Financial assets and liabilities measured at fair value on a recurring basis

Financial assets and liabilities measured and recorded at fair value on a recurring basis were presented on the Company’s Condensed Consolidated Balance Sheets as follows (in thousands):

	March 31, 2013								December 30, 2012
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents(1)	$	815,213	$	120,394	$	—	$	935,607	$	582,743	$	229,360	$	—	$	812,103
Short-term marketable securities	43,435		2,118,638		—		2,162,073		16,589		1,863,445		—		1,880,034
Long-term marketable securities	2,305		2,880,405		—		2,882,710		10,797		2,825,134		—		2,835,931
Other current assets and other non-current assets	—		14,937		—		14,937		—		20,058		—		20,058
Total financial assets	$	860,953	$	5,134,374	$	—	$	5,995,327	$	610,129	$	4,937,997	$	—	$	5,548,126
Other current accrued liabilities and non-current liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584
Total financial liabilities	$	—	$	34,821	$	—	$	34,821	$	—	$	13,584	$	—	$	13,584

————

⁽¹⁾  Cash equivalents exclude cash of $212.5 million and $183.4 million included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets as of March 31, 2013 and December 30, 2012, respectively.

Available for Sale Investments

Available-for-sale investments were as follows (in thousands):

	March 31, 2013									December 30, 2012
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Fixed income securities:
U.S. Treasury securities	$	65,727	$	13	$	—		$	65,740	$	27,377	$	9	$	—		$	27,386
U.S. government-sponsored agency securities	23,525		36		(1		)	23,560		28,339		41		(1		)	28,379
International government securities	17,093		1		(15		)	17,079		153,936		13		(3		)	153,946
Corporate notes and bonds	847,920		3,434		(69		)	851,285		864,170		3,890		(938		)	867,122
Asset-backed securities	184,368		225		(43		)	184,550		179,356		453		—			179,809
Mortgage-backed securities	1,703		—		(22		)	1,681		1,872		8		(14		)	1,866
Municipal notes and bonds	4,013,057		28,499		(274		)	4,041,282		3,665,032		22,697		(912		)	3,686,817
Total available-for-sale investments	$	5,153,393	$	32,208	$	(424	)	$	5,185,177	$	4,920,082	$	27,111	$	(1,868	)	$	4,945,325

Available-for-sale securities that were in an unrealized gain position

The fair value and gross unrealized losses on the available-for-sale securities that have been in an unrealized loss position, aggregated by type of investment instrument, and the length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2013, are summarized in the following table (in thousands). Available-for-sale securities that were in an unrealized gain position have been excluded from the table.

	Less than 12 months					Greater than 12 months
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
U.S. Treasury securities	$	4,199	$	—		$	—	$	—
U.S. government-sponsored agency securities	6,156		(1		)	—		—
International government securities	9,868		(15		)	—		—
Corporate notes and bonds	77,132		(68		)	5,000		(1		)
Asset-backed securities	45,241		(43		)	—		—
Mortgage-backed securities	1,681		(22		)	—		—
Municipal notes and bonds	133,533		(274		)	—		—
Total	$	277,810	$	(423	)	$	5,000	$	(1	)

Gross realized gains and (losses) on sales of available-for-sale securities

The following table shows the gross realized gains and (losses) on sales of available-for-sale securities (in thousands).

	Three months ended
	March 31, 2013			April 1, 2012
Gross realized gains	$	718		$	1,075
Gross realized losses	(1,032		)	(552		)

Fixed income securities by contractual maturity

Fixed income securities by contractual maturity as of March 31, 2013 are shown below (in thousands). Actual maturities may differ from contractual maturities because issuers of the securities may have the right to prepay obligations or the Company has the option to demand payment.

	Amortized Cost		Fair Value
Due in one year or less	$	1,307,668	$	1,311,454
After one year through five years	3,022,182		3,050,188
After five years through ten years	151,806		151,812
After ten years	671,737		671,723
Total	$	5,153,393	$	5,185,177

Related costs and the fair values based on quoted market prices

For those financial instruments where the carrying amounts differ from fair value, the following table represents the related carrying values and the fair values, which are based on quoted market prices (in thousands). These financial instruments were categorized as Level 1 as of both March 31, 2013 and December 30, 2012.

	March 31, 2013				December 30, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
1% Sr. Convertible Notes due 2013	$	921,007	$	927,319	$	906,708	$	927,820
1.5% Sr. Convertible Notes due 2017	799,628		1,286,500		789,913		1,159,370
Total	$	1,720,635	$	2,213,819	$	1,696,621	$	2,087,190

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Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Fair value of stock options granted to employees, officers and non-employee board members and ESPP shares granted to employees

The fair value of the Company’s stock options granted to employees, officers and non-employee board members, excluding unvested stock options assumed through acquisitions, was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.38	0.43
Risk-free interest rate	0.67%	0.62%
Expected term	4.4 years	4.3 years
Estimated annual forfeiture rate	8.59%	8.57%
Weighted average fair value at grant date	$16.46	$17.09

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions

The fair value of the Company’s ESPP shares issued to employees was estimated using the following weighted average assumptions:

	Three months ended
	March 31, 2013	April 1, 2012
Dividend yield	None	None
Expected volatility	0.33	0.38
Risk-free interest rate	0.13%	0.15%
Expected term	½ year	½ year
Weighted average fair value at purchase date	$12.54	$12.24

Stock options and stock appreciation rights

A summary of stock option and stock appreciation rights (“SARs”) activity under all of the Company’s share-based compensation plans as of March 31, 2013 and changes during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average exercise price and remaining contractual term):

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options and SARs outstanding at December 30, 2012	15,426		$	40.73	3.2	$	109,411
Granted	910		51.38
Exercised	(2,942	)	32.29			55,870
Forfeited	(113	)	42.77
Expired	(2,169	)	60.94
Options and SARs outstanding at March 31, 2013	11,112		39.87		4.0	168,991
Options and SARs vested and expected to vest after March 31, 2013, net of forfeitures	10,589		39.51		3.9	164,943
Options and SARs exercisable at March 31, 2013	6,435		35.84		2.9	124,402

Summary of the changes in RSUs outstanding

A summary of the changes in RSUs outstanding under the Company’s share-based compensation plans during the three months endedMarch 31, 2013 is presented below (in thousands, except for weighted average grant date fair value):

	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non-vested share units at December 30, 2012	3,077		$	43.51	$	131,622
Granted	1,839		51.50
Vested	(697	)	42.83		35,026
Forfeited	(68	)	43.81
Non-vested share units at March 31, 2013	4,151		47.18		195,851

Share-based compensation expense

The following tables set forth the detailed allocation of the share-based compensation expense (in thousands):

	Three months ended
	March 31, 2013			April 1, 2012
Share-based compensation expense by caption:
Cost of revenues	$	1,717		$	1,537
Research and development	11,640			10,027
Sales and marketing	3,871			3,629
General and administrative	4,506			3,887
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911
Share-based compensation expense by type of award:
Stock options and SARs	$	8,269		$	9,216
RSUs	11,970			7,894
ESPP	1,495			1,970
Total share-based compensation expense	21,734			19,080
Total tax benefit recognized	(6,916		)	(5,169		)
Decrease in net income	$	14,818		$	13,911

Fair value of options and RSUs

The total grant date fair value of options and RSUs vested during the three months ended March 31, 2013 and April 1, 2012 was as follows (in thousands):

	Three months ended
	March 31, 2013		April 1, 2012
Fair value of options vested	$	14,568	$	14,760
Fair value of RSUs vested	29,821		19,301
Total fair value of options and RSUs vested	$	44,389	$	34,061

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Balance Sheet Information-Equity Investments (Details 4) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Related Party Transactions
Notes Receivable And Investments In Related Parties	$ 1,286,073	$ 1,460,112
Flash Partners Ltd [Member]
Related Party Transactions
Notes Receivable	164,701	180,254
Investments	213,027	232,547
Flash Alliance Ltd [Member]
Related Party Transactions
Notes Receivable	382,531	476,800
Investments	315,453	342,048
Flash Forward Ltd [Member]
Related Party Transactions
Notes Receivable	148,762	162,810
Investments	$ 61,599	$ 65,653

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Derivatives and Hedging Activities (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Non-designated cash flow hedges, assets
Total derivatives, assets	$ 14,937	$ 19,064
Foreign exchange contracts [Member] | Other Current Assets [Member]
Designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Assets	260	0
Non-designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Non-designated, Assets	14,677	19,064
Total derivatives, assets	14,937	19,064
Foreign exchange contracts [Member] | Other Non Current Assets [Member]
Designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Assets	0	0
Non-designated cash flow hedges, assets
Cash Flow Hedge Derivative at Fair Value, Non-designated, Assets	0	994
Total derivatives, assets	0	994
Foreign exchange contracts [Member] | Other Current Accrued Liabilities [Member]
Designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Liabilities	13,167	7,058
Non-designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Non-designated, Liabilities	21,654	6,526
Total derivatives, liabilities	34,821	13,584
Foreign exchange contracts [Member] | Non-current liabilities [Member]
Designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Liabilities	0	0
Non-designated cash flow hedges, liabilities
Cash Flow Hedge Derivative at Fair Value, Non-designated, Liabilities	0	0
Total derivatives, liabilities	$ 0	$ 0

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Apr. 01, 2012
Cash flows from operating activities:
Net income	$ 166,229	$ 114,385
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes	53,151	5,503
Depreciation	53,017	33,178
Amortization	65,151	67,156
Provision for doubtful accounts	(197)	(1,285)
Share-based compensation expense	21,734	19,080
Excess tax benefit from share-based plans	(8,450)	(8,597)
Impairment and other	(3,173)	(5,454)
Other non-operating	136	7,652
Changes in operating assets and liabilities:
Accounts receivable, net	186,726	199,437
Inventory	16,776	(85,212)
Other assets	(20,156)	26,743
Accounts payable trade	2,898	(34,293)
Accounts payable to related parties	(37,901)	(75,203)
Other liabilities	(22,290)	(195,916)
Total adjustments	307,422	(47,211)
Net cash provided by (used in) operating activities	473,651	67,174
Cash flows from investing activities:
Purchases of short and long-term marketable securities	(1,150,347)	(756,357)
Proceeds from sales of short and long-term marketable securities	513,354	625,736
Proceeds from maturities of short and long-term marketable securities	293,205	192,842
Acquisition of property and equipment, net	(48,352)	(144,218)
Investment in Flash Ventures	0	(12,526)
Notes receivable issuances to Flash Ventures	0	(51,130)
Notes receivable proceeds from Flash Ventures	53,586	63,833
Purchased technology and other assets	(237)	(28)
Acquisitions, net of cash acquired	(142)	(54,538)
Net cash provided by (used in) investing activities	(338,933)	(136,386)
Cash flows from financing activities:
Proceeds from employee stock programs	93,075	45,318
Distribution to non-controlling interests	(87)	0
Excess tax benefit from share-based plans	8,450	8,597
Share repurchase program	(89,621)	(60,911)
Net cash received for stock repurchase contracts	0	1,142
Net cash provided by (used in) financing activities	11,817	(5,854)
Effect of changes in foreign currency exchange rates on cash	6,105	833
Net increase (decrease) in cash and cash equivalents	152,640	(74,233)
Cash and cash equivalents at beginning of the period	995,470	1,167,496
Cash and cash equivalents at end of the period	$ 1,148,110	$ 1,093,263

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill. Goodwill balances as of March 31, 2013 and December 30, 2012 are presented below (in thousands):

	Carrying Amount
Balance as of December 30, 2012	$	201,735
Adjustment	601
Balance as of March 31, 2013	$	202,336

Goodwill increased by $0.6 million due to the resolution of a legal contingency matter during the first quarter of fiscal year 2013 related to an acquisition from fiscal year 2012.

Intangible Assets. Intangible asset balances are presented below (in thousands):

	March 31, 2013
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	200,960	$	(77,934	)	$	123,026
Customer relationships	13,050		(11,710		)	1,340
Trademarks	5,700		(2,184		)	3,516
Covenants not to compete	3,100		(2,005		)	1,095
Acquisition-related intangible assets	222,810		(93,833		)	128,977
Technology licenses and patents	133,909		(71,823		)	62,086
Total intangible assets subject to amortization	356,719		(165,656		)	191,063
Acquired in-process research and development	37,525		—			37,525
Total intangible assets	$	394,244	$	(165,656	)	$	228,588

	December 30, 2012
	Gross Carrying Amount		Accumulated Amortization			Adjustments			Net Carrying Amount
Developed product technology	$	200,960	$	(68,104	)	$	—		$	132,856
Core technology	79,800		(79,800		)	—			—
Customer relationships	13,050		(10,043		)	—			3,007
Trademarks	5,700		(1,870		)	—			3,830
Covenants not to compete	3,100		(1,618		)	—			1,482
Acquisition-related intangible assets	302,610		(161,435		)	—			141,175
Technology licenses and patents	133,909		(65,690		)	—			68,219
Total intangible assets subject to amortization	436,519		(227,125		)	—			209,394
Acquired in-process research and development	38,385		—			(860		)	37,525
Total intangible assets	$	474,904	$	(227,125	)	$	(860	)	$	246,919

The Company performs tests for impairment of long-lived assets whenever events or circumstances suggest that long-lived assets may not be recoverable. In the first quarter of fiscal year 2013, due to an increase in overall cost estimates and development timelines related to an in-process project for a prior acquisition, the Company performed impairment tests on the amortizable intangible assets and indefinite-lived intangible assets for this acquisition. The Company tested the recoverability of the amortizable intangible assets and performed a qualitative impairment assessment on the indefinite-lived intangible assets. As a result, the Company determined there was no impairment for either. The Company will continue to monitor any events or circumstances that could indicate its intangible assets are impaired.

The annual expected amortization expense of intangible assets as of March 31, 2013, excluding acquired in-process research and development, is presented below (in thousands):

	Estimated Amortization Expense
	Acquisition-related Intangible Assets		Technology Licenses and Patents
Fiscal year:
2013 (remaining nine months)	$	32,729	$	17,467
2014	40,545		21,231
2015	40,380		20,056
2016	15,323		3,332
Total intangible assets subject to amortization	$	128,977	$	62,086

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Goodwill and Intangible Assets (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013
Goodwill and Finited-lived Intangible Assets
Goodwill, Purchase Accounting Adjustments	$ 601

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Commitments, Contingencies and Guarantees-Operating Leases (Details Textual 5)	Mar. 31, 2013
Operating Leased Assets
Operating Lease Expiration Minimum (Year)	2013
Operating Lease Expiration Maximum (Year)	2017

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Share-Based Compensation-Plan Info (Details Textuals 2) (2005 Employee Stock Purchase Plan [Member])	Mar. 31, 2013
2005 Employee Stock Purchase Plan [Member]
Stock Purchase Plan Activity
Purchase price of common stock under Employee stock purchase plan as a percentage of fair market value of share	85.00%

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Expense And Effective Tax Rate

The following table presents the provision for income taxes and the effective tax rate (in thousands, except percentages):

	Three months ended
	March 31, 2013			April 1, 2012
Provision for income taxes	$	67,665		$	52,163
Effective tax rate	28.9		%	31.3		%

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Commitments, Contingencies and Guarantees-JV Lease Amounts (Details 2) (Flash Ventures [Member]) In Thousands, unless otherwise specified	Mar. 31, 2013 USD ($)		Mar. 31, 2013 JPY (¥)	Dec. 30, 2012 USD ($)	Mar. 31, 2013 Payment of Principal Amortization [Member] USD ($)	Mar. 31, 2013 Purchase Option Exercise Price at Final Lease Terms [Member] USD ($)
Remaining guarantee obligations
Year 1	$ 242,300				$ 154,103	$ 88,197
Year 2	204,429				155,389	49,040
Year 3	117,354				105,202	12,152
Year 4	133,573				72,340	61,233
Year 5	45,521				19,261	26,260
Guarantee of Flash Ventures equipment leases	$ 743,177	[1]	¥ 69,900,000	$ 926,000	$ 506,295	$ 236,882

[1] The Company’s guarantee obligation, net of cumulative lease payments, was 69.9 billion Japanese yen, or approximately $743 million based upon the exchange rate at March 31, 2013.

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Investments and Fair Value Measurements-Fixed Income Maturities (Details 7) (Fixed Income Securities [Member], USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 30, 2012
Fixed income securities by contractual maturity
Amortized Cost	$ 5,153,393	$ 4,920,082
Fair Value	5,185,177	4,945,325
Due Within One Year [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in one year or less	1,307,668
Fair Value, due in one year or less	1,311,454
Due Within Two to Five Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in years two through five	3,022,182
Fair Value, due in years two through five	3,050,188
Due Within Six To Ten Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due in years six through ten	151,806
Fair Value, due in years six through ten	151,812
Due Over Ten Years [Member]
Fixed income securities by contractual maturity
Amortized Cost, due after year ten	671,737
Fair Value, due after year ten	$ 671,723

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Investments and Fair Value Measurements Fair Value Of Financial Instruments Policy

3 Months Ended

Mar. 31, 2013

Fair Value Of Financial Instruments Policy [Abstract]

Fair Value of Financial Instruments, Policy

For certain of the Company’s financial instruments, including cash held in banks, accounts receivable and accounts payable, the carrying amounts approximate fair value due to their short maturities, and are therefore excluded from the fair value tables below.