SanDisk Wins $28.5M Patent Suit - Analyst Blog

Flash storage solutions provider SanDisk Corp. SNDK received a favorable verdict in a patent infringement lawsuit against PNY Technologies. The jury sided with SanDisk and awarded $28.5 million in damages for the breach of license agreement.

SanDisk has a strong portfolio of 4900 patents related to memory storage and management, and the current verdict reaffirms the company's vigor in defending its patents from any possible breach. Moreover, the claim of damages ensures that SanDisk's patents can be monetized through licensing agreements with other storage providers.

SanDisk is benefiting from the growing demand for solid state drive SSD products and over the time has also made significant investments to launch new and innovative SSD products to cater to the pent up demand. With these launches, we expect SanDisk to strengthen its market position against competitors such as Micron MU and Fusion-io FIO.

Per technology research firm Gartner, the total SSD market is poised for a considerable growth, with revenues projected at $19.4 billion in 2014 from $9.2 billion in 2012. Thus, SanDisk is expected to grab 10–12% revenue share by 2014 from 3–4% at the end of 2012.

Buoyed by these factors management also remains positive about SSD revenue growth, favorable product mix and better supply/demand metrics in 2014 but expects modest price decline. The company expects bit supply to increase in the range of 25% to 35%.

Nonetheless, lower average selling price per gigabyte could hamper SanDisk's top line.  Moreover, lackluster PC sales, European issues, competition from its peers and currency fluctuations could hurt fundamentals to some extent.

Currently, SanDisk has a Zacks Rank #3 (Hold). Investors can consider a better-ranked stock like Juniper Networks JNPR which sports a Zacks Rank #1 (Strong Buy).