SanDisk shares jump on mobile gadget trends

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SanDisk Corp. shares surged Friday after the maker of computer memory chips reported substantially higher profit than Wall Street anticipated.

THE SPARK: SanDisk's financial results reflected strong sales trends in the market for so-called "flash" memory widely used in consumer electronics.

Its second-quarter net income, excluding some expenses, was $1.14 per share, well ahead of the 99 cents per share that analysts expected, according to a poll by FactSet. Revenue was $1.37 billion for the three months ended July 3, ahead of the expected $1.34 billion.

Guidance for the third quarter called for revenue of $1.38 billion to $1.43 billion. Analysts had expected $1.34 billion.

THE BIG PICTURE: SanDisk's results come amid worries about the health of consumer electronics spending.

The PC market in particular has been hurt, and has been contracting in the U.S. and Europe. Results this week from Intel Corp., the No. 1 maker of computer microprocessors, and Microsoft Corp., which makes the Windows software that powers most of the world's PCs, showed elements of the strain from weakened consumer spending.

But part of those troubles have been caused by rising sales of the kinds of gadgets that use SanDisk memory chips, namely smartphones and tablets.

Blowout numbers reported this week by Apple Inc. underline the demand for the new kinds of Internet-connected gadgets. Apple has now sold 29 million iPads since they went on sale in April 2010, and more than 128 million iPhones since they went on sale in 2007.

The dynamics are seen helping SanDisk as the computer industry approaches the all-important back-to-school shopping season, which has been weak in recent years amid the Great Recession.

THE ANALYSIS: Analyst Tristan Gerra with Robert W. Baird & Co. said SanDisk has an "attractive" stock price considering that demand should be better than expected in the third quarter. Gerra reiterated the firm's "Outperform" rating on SanDisk shares.

SHARE ACTION: SanDisk shares rose $4.61, or 11.1 percent, to $46.18.

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