MILPITAS, Calif. ( TheStreet) -- Mention smartphones and tablets and companies like Apple ( AAPL) and Research In Motion ( RIMM) spring to mind, although the explosion in mobile data is also driving growth at Flash memory giant SanDisk ( SNDK). SanDisk shares have risen more than 33% this year, somewhat disproving the notion that storage is unsexy. Companies like Motorola ( MOT), Samsung, Apple and RIM use SanDisk Flash, making the storage maker a crucial ( if largely unseen) part of the mobile revolution.
And to think that SanDisk's mobile boost is a far cry from SanDisk's legacy business of providing Flash cards for products such as point-and-shoot cameras. "Sandisk can be described as best in class in the flash memory space due to its leadership in the flash card business," explained Tristan Gerra, senior analyst at Robert W. Baird, in an email to TheStreet. The analyst points to SanDisk's reputation for innovation, as illustrated with its revolutionary 3-bit per-cell manufacturing process, which essentially allows more information to be placed in a smaller place. Developed jointly by SanDisk and Toshiba, 3-bit per cell boosts the capacity of Flash memory while at the same time cutting production costs. SanDisk recently explained that 3-bit per cell is slashing its manufacturing costs by 40% and helped the company achieve its best-ever gross margin of 52% during the third quarter. "The company is very much a leader in innovation, being the first to come out with 3-bit per cell Flash," added Daniel Amir, senior research analyst at Lazard Capital Markets. "That gives them an advantage." This, in turn, is opening the door to new markets. "As the cost of NAND technology and NAND products continues to come down, there will be more opportunities for us," explained SanDisk CEO Eli Harari, during a recent briefing with journalists. Harari, who retires at the end of this year, sees future growth for the company in emerging markets such as India, citing the Indian government's efforts to build a $35 tablet for students.
SanDisk is also laying foundations for next-generation technologies, which should help the company continue its recent momentum. "SanDisk is perceived as the premier company in the Flash storage space," Lazard Capital's Amir told TheStreet. "
But the future lies in the solid state disk (SSD) market, in notebooks, and also in the enterprise." Amir estimates that around 150 million notebooks are sold each year and said most of these will ship with SSD technology, a more efficient form of data storage that's creeping onto the market. Apple, for example, recently announced that SSDs will feature on its new MacBook Air. Companies like EMC ( EMC) and IBM ( IBM) have also thrown weight behind the technology. SanDisk is also exploring the enterprise potential of SSDs. "Enterprise requires different types of architecture, and we will be in that area," explained SanDisk CEO Harari. "Our initial focus is on the much larger market, which is netbooks, notebooks and tablets, but we also intend to be in the enterprise market." SanDisk, which competes with Intel ( INTC) and Micron Technology ( MU), is also getting ready for 3D Memory, a cheaper, faster version of Flash, said Harari. Long-term, the biggest challenge for SanDisk and soon-to-be CEO Sanjay Mehrotra is combatting commodity pricing, although the push into new markets should help offset that trend. Analysts are divided on the best investment strategy for SanDisk, with Robert W. Baird rating the firm neutral while Lazard Capital rates the company a buy. "Obviously, there's other players in the market, like Samsung and Toshiba, but, when you're talking about a U.S. stock, you have to look at SanDisk," said Lazard's Amir. SanDisk blew past analysts' earnings estimates in its third-quarter results last month, though revenue came in just short of Wall Street's prediction. --Written by James Rogers in New York. >To follow the writer on Twitter, go to http://twitter.com/jamesjrogers. >To submit a news tip, send an email to: firstname.lastname@example.org