Nelson Chan EVP, Consumer Products Business and Corporate Marketing Agenda Global Market Share Opportunities Global Sales Expansion Key Market Segments and Product Strategies Branding and Advertising 2 February 23, 2006 Key Markets Million Units 600 CAGR 2005-08 500 Gaming w. slot or USB 62% 400 Digital Cameras 3% USB Drives 24% 300 Flash Audio Players 33% Phone Slots 68% 200 100 0 2004 2005 2006 2007 2008 Sources: Gaming - IDC Jan06 / SanDisk, Flash Audio - Gartner Feb06 , DSCs - IDC Aug05/Feb06, UFDs - Gartner Feb06, Phone Slots - Strategy Analytics Feb06 3 February 23, 2006 50% Growing Market Share: Leader in U.S. 45% 40% 35% 30% Retail Revenue Shares – Cards & UFDs 25% 20% 15% 10% 5% 0% 2005-01 4 February 23, 2006 2005-02 2005-03 2005-04 2005-05 2005-06 Source: NPD Group 2005-07 SanDisk 2005-08 Lexar 2005-09 PNY Sony 2005-10 Kodak Memorex 2005-11 Fujifilm Kingston 2005-12 25% Europe: Opportunity for Growth in 20% 2006 15% Retail Revenue Shares – Cards + UFDs 10% 5% 0% 2005-01 5 February 23, 2006 2005-02 2005-03 2005-04 2005-05 Source: GfK (France, Germany, UK) 2005-06 2005-07 SANDISK PNY TECH 2005-08 TRADEBRAND 2005-09 SONY FUJIFILM 2005-10 HAMA LEXAR 2005-11 OLYMPUS DANE ELEC 2005-12 KINGSTON UNBRANDED APAC: Opportunity for Growth 30% in 2006 25% 20% 15% All Formats per Brand 10% 5% 0% 6 February2 23,00 20065-01 − Revenue 2005-02 2005-03 Source: GfK20 0(China,5-04 Korea, Hong Kong, Taiwan, Singapore) 2005-05 2005-06 SANDISK 2005-07 SONY KINGSTON 2005-08 TOSHIBA OLYMPUS 2005-09 ADATA FUJIFILM 2005-10 TRANSCEND LG 2005-11 AIGO 2005-12 Japan: Opportunity to Lead In Highly Fragmented Market All Formats per Brand − Shipments 20% 18% SanDisk 16% Buffalo 14% Hagiwara 12% Panasonic 10% I-O Data 8% Lexar 6% Sony 4% 2% 0% 1 2 3 2 3 4 Q Q Q Q4 Q1 Q Q Q 4 5 00 00 2 2 Source: TSR 7 February 23, 2006 Flash Digital Audio Players: US Market Shares 90 Revenue Share 80 Apple Sony 70 60 50 40 SanDisk 30 iRiver 20 10 0 Samsung Creative Labs Jan-0 5 8 February 23, 2006 Feb-05 Mar-05 Apr-05 90 May-05 80 Unit Share Jun-05 70 Apple Sony Jul-05 60 Aug -05 50 Sep -05 40 Source: NPD Group 30 Oct-05 SanDisk Creative Labs Nov-05 20 Dec-05 10 0 Jan-05 Samsung iRiver Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Retail Sales and Marketing Strategy 1 Be Everywhere where people will purchase …with the broadest product offering Own the Store – “Store in Store” 2 Segment, Differentiate, Promote, Train, Merchandise Build the Brand – 3 Predispose the Customer to choose SanDisk 9 February 23, 2006 Worldwide Sales Structure: Aggressive Expansion Outside the US Yokohama HQ – Dublin Sunnyvale Retail/OEM Retail/OEM Retail/OEM CE/Mobile/ CE/Mobile/ Photo Direct/ Photo Hong Kong Distribution Sales Ops Germany Field Eng Retail/OEM CE/Mobile UK, France Photo Nordic CE/Mobile Food/Drug S Europe E Europe China US Middle East Taiwan Canada Africa Mexico Korea Sydney S Asia Sales Ops India Sales Ops Field Eng Retail CE/Mobile/ Doubling direct sales in EMEA and APAC Photo (with focus on China) Australia Added new sales team in Australia New Zealand Regional marketing staff in EMEA, APAC and Japan 10 February 23, 2006 Global Reach: Over 150,000 Storefronts Worldwide USA, Mexico & USA, Mexico & Asia/ So. America Asia/ So. America Pac Rim 51,000+ Pac Rim 51,000+ Europe 27,000+ Canada Europe 27,000+ AAFES Canada T Mobile 51,000+ 5,000+5,000+ 51,000+ Best Buy Carphone Japan Brooks/Eckerd Warehouse Japan 14,000+14,000+ Circuit City Woolworths Best CompUSA Bell World Dixons Coles Wal-Mart Best Buy Orange Fortress Aeon Costco Blacks Wal-Mart Broadway BIC K-Mart Costco Camara Lotte Best Musicland London Euronix Costco Edion Office Depot Drugs FotoSistema Sunfar K’s Staples Radio Shack Fotoco GoMe Kitamura Sears Sears FNAC SuNing Kojima Rite Aid Shoppers Foto Service DahZong Lawsons Radio Shack Drug Mart Germanos Officeworks Matsukiyo Meijer/Food West Fair Internet shops Big W Yamada Safeway Canada Tire Knut Leclerc Harris Tech. Yodobashi Kroger MakroMarkt Good Guys HEB PhotoStation H Norman MDI Pulsat Woolworths GameStop RIC Sprint Ringfoto 20,000+ Food & Drug Stores 20,000+ Food & Drug Stores Verizon Schlecker 30,000+ Mobile Stores 30,000+ Mobile Stores 48,000 store fronts added in 2005! 11 February 23, 2006 World Class Customers 12 February 23, 2006 Differentiated and Segmented Strategy Core Emerging High Growth Digital Personal Digital Mobile Gaming Imaging Data Storage Audio Phones Best Memory Stick Cruzer® Titanium II SansaTMe200 PRO Duo™ SanDisk Extreme® Family Memory Stick PRO Duo™ Better miniSD™ SansaTM c100 Cruzer® Micro II SanDisk Ultra® Family MMCmobile™ SD™ microSD™ Blue Family SansaTM m200 Good Cruzer® Micro Skins iNAND™ Cruzer Crossfire™ Cruzer® Mini Shoot & Store™ Family Sansa® e100 13 February 23, 2006 Digital Still Camera Market: Growing Installed Base DSC Shipments & Installed Base Installed Base 4 Years shipments 250 Life Span 4 Years 200 150 100 50 - 2004 2005 2006 2007 2008 Source: DSCs-IDC Aug ’05/Feb ‘06, Installed Base-SanDisk Estimates 14 February 23, 2006 Card Capacities Increasing Digital Camera Market Average Capacities Cards for DSCs Units Cards f or DSCs $ TA M MB M Units M $ 2,000 250 NAND Units for DSCs DSC NAND $ TAM 4,500 4,000 200 3,500 1,500 3,000 150 2,500 1,000 2,000 100 1,500 50 1,000 500 500 0 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 15 February 23, 2006 Source: Web-Feet Research, Feb ‘06 Digital Imaging Segments MainstreamProfessionalValue-ConsciousProsumer 16 February 23, 2006 USB Flash Drive Market USB Drive Market Average Capacities M Units M $ 180 3,500 M B 2,500 UFD Units 160 3,000 140 UFD $ TA M 2,000 2,500 120 100 2,000 1,500 80 1,500 1,000 60 1,000 40 500 20 500 0 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Source: Gartner Feb ‘06 17 February 23, 2006 USB Flash Drive Products New Product New Product 18 February 23, 2006 U3TM – Transforming the USB Market Transform USB Drives from Today’s ‘Floppy Drive Replacement’ into a Portable Personal Workspace Enable a Continuum of Online and Offline Activity Participate in the Shift from The PC-Centric Paradigm to Access of Data “Anytime, Anywhere” Home Office Friend’s Business Internet House Center Cafe 19 February 23, 2006 U3 Fuels Demand for Flash Increases Average Drive Capacity Usage Expands the Market Through New Uses Meets Individual Needs Through Software Personalization 20 February 23, 2006 Growing the Market and Increasing Differentiation: Protection Against Online Fraud Ideal for Many Online Applications (Banking, Trading, E-Commerce, etc.) Uses Highly Secure, Dual-Factor Authentication Partnering with the Security Industry’s Leaders RSA & Verisign Password Request + Authentication Password Crypto-Secret Username Password Authenticate Crypto-Secret 21 February 23, 2006 Growing the Market and Increasing Differentiation: Protection for the Enterprise SanDisk is Partnering with Key Companies to Provide Highly Secure Enterprise Solutions Goal − Ensure Sensitive Data Doesn’t “Walk Out the Door” via an Unsecured USB Drive Working to Create the Right Solutions PLUS Provide Methods for Managing Fleets of Devices Authorized UFD Remote Device Administration Personal UFD IT Manager 22 February 23, 2006 Gaming Card Market Gaming Card Market Average Capacities MB M Units M $ 1,000 80 1,200 70 Gaming Card Units 800 1,000 60 Gaming Card $ 800 600 50 40 600 400 30 400 20 200 200 10 0 0 0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 Source: Web-Feet May ‘05 23 February 23, 2006 New Gaming Consoles All Major New In-Home Consoles are USB/Card Enabled Content import, downloads and game saves are primary drivers Sony® PS3™ CF, SD, and MS slot 6 USB ports Microsoft® Xbox 360™ Proprietary memory unit with USB interface 3 USB ports Nintendo® Revolution SD slot 2 USB ports 24 February 23, 2006 Gaming – Incremental Store Fronts and Shelf Space New Products 25 February 23, 2006 Gaming In Retail 26 February 23, 2006 Flash-Based Digital Audio Players Billions $20 $18 $16 $14 $12 IDC Sept 2005 $10 $8 Gartner Feb $6 2006 $4 $2 $0 2004 2005 2006 2007 2008 27 February 23, 2006 Flash Audio Player Strategy TM Significant Cost Advantage Due to Vertical Integration Leverage Established Global Retail Sales Channels Rapid global expansion – Europe and Asia Develop “Cool” Products at Very Attractive Price Points “Good, Better, Best” product portfolio Cards slots for expandability and portability Own the Market Sweet Spot: $49-$149 Allow Customer Choice Support of Microsoft PlaysForSure DRM (RealNetworks, Napster and Yahoo Music) 28 February 23, 2006 Strong Channel Presence “Own the store” − Educate, Promote and Merchandise Promote Media Centers and “Store Within a Store” Concepts “Dramatically Increase In-Store Adjacencies” 29 February 23, 2006 Building the Brand Increase Sales in Established and New Markets ~2% of revenues for branding and merchandising Building Global Brand Awareness Engaging Grey San Francisco for global advertising and MetaDesign for brand identity communication Predispose Consumers to Buy SanDisk Premium brand at everyday price 30 February 23, 2006 Marketing Objectives Drive the Brand Globally Focus on high growth geographies (EMEA, China, etc.) Focus Global Marketing Campaigns on Key Areas SanDisk brand and products Digital audio Mobile (handsets) High-performance card line (digital imaging) Promote Usage of Flash Cards in Mobile Phones and Drive Retail Attach Rates Establish SanDisk Brand in Digital Audio and Solidify #2 Position 31 February 23, 2006 Summary Focusing on Multiple High-Growth Markets Unrivaled Product Lines Both breadth