On October 30, 2023, the Board of Directors authorized pursuing a plan to separate the HDD and Flash business units to create two independent, public companies. The separation is expected to better position each business unit to execute innovative technology and product development, capitalize on unique growth opportunities, and operate more efficiently with distinct capital structures.

In March 2024, SanDisk China Limited entered into an Equity Purchase Agreement to sell 80% of its equity interest in SanDisk Semiconductor (Shanghai) Co. Ltd. to JCET, forming a joint venture. This transaction is subject to customary closing conditions.

During 2024, the company drew and repaid $600 million under a Delayed Draw Term Loan, primarily used for payments on our tax liability to the IRS for the years 2008 through 2012. The company also used a portion of the net proceeds from the offering of the 2028 Convertible Notes to settle the remaining 2024 Convertible Notes.

Since the beginning of 2023, the company has been implementing measures to reduce operating expenses and to proactively manage supply and inventory to align with demand and improve capital efficiency while continuing to deploy innovative products.

Significant effort is underway and extensive progress has been made with respect to the separation as we continue to drive towards completing the work required to separate the businesses by the end of calendar year 2024.

In September 2023, the company completed a sale and leaseback of its facility in Milpitas, California, receiving net proceeds of $191 million in cash and recording a gain of $85 million on the sale.

The proposed separation of our HDD and Flash business units into two independent public companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all.

We rely substantially on strategic relationships with various partners, including Kioxia, which subjects us to risks and uncertainties that could harm our business.

The compromise, damage or interruption of our technology infrastructure, information systems or products by cybersecurity incidents, data security breaches, other security problems, design defects, information system failures or other events could have a material negative impact on our business.

Our industry is highly competitive. We believe we are well-positioned with our leading product portfolio, premium consumer brand, differentiated semiconductor innovation engine and leadership in driving cost efficiency. Nevertheless, we face strong competition from other manufacturers of HDD and Flash in the Cloud, Client and Consumer end markets.

The data storage industry has experienced consolidation over the past several years, which could enhance the resources and lower the cost structure of some competitors. These factors could result in a substantial decrease in our market share and harm our business.

If we do not properly manage technology transitions and product development and introduction, our competitiveness and operating results may be negatively affected.

We are dependent on a limited number of qualified suppliers who provide critical services, materials or components, and a disruption in our supply chain could negatively affect our business.

Our operations, and those of certain of our suppliers and customers, are subject to substantial risk of damage or disruption.

As forecasting demand becomes more difficult, the risk that our forecasts are not in line with demand increases. This has caused, and may in the future cause, our forecasts to exceed actual market demand, resulting in periods of product oversupply, excess inventory, underutilization of manufacturing capacity and price decreases.

The nature of our industry and its reliance on IP and other proprietary information subjects us and our suppliers, customers and partners to the risk of significant litigation.

If we do not properly manage technology transitions and product development and introduction, our competitiveness and operating results may be negatively affected.

R&D expense decreased $102 million or 5% in 2024 compared to 2023, which was primarily driven by a $31 million decrease in compensation and benefits, a $30 million decrease in depreciation and amortization and a $13 million decrease in outside services.

During 2024, we drew and repaid $600 million principal amount (the "Delayed Draw Term Loan") under a loan agreement we entered into in January 2023 and amended in June 2023. Proceeds from this loan were primarily used for payments on our tax liability to the IRS for the years 2008 through 2012.

Our level of debt may negatively impact our liquidity, restrict our operations and ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

On November 3, 2023, we issued $1.60 billion aggregate principal amount of convertible senior notes, which bear interest at an annual rate of 3.00% and mature on November 15, 2028

We are and may in the future be subject to state, federal and international legal and regulatory requirements, such as environmental, labor, health and safety, trade and public-company reporting and disclosure regulations, customers' standards of corporate citizenship and industry and coalition standards, such as those established by the Responsible Business Alliance (“RBA”), and compliance with those regulations and requirements could cause an increase in our operating costs and failure to comply may harm our business.

Our aspirations, disclosures and actions related to environmental, social and governance (“ESG”) matters expose us to risks that could adversely affect our reputation and performance.

We believe responsible and sustainable business practices support our long-term success. As a company, we are deeply committed to protecting and supporting our people, our environment and our communities.

Adverse changes in global or regional economic and social conditions, including, but not limited to, volatility in the financial markets, reduced access to credit, recession, inflation, rising interest rates, slower growth in certain geographic regions, political uncertainty, geopolitical tensions or conflicts, terrorism, other macroeconomic factors and new or changed regulations, could significantly harm demand for our products, increase credit and collectability risks, result in revenue reductions, reduce profitability as a result of underutilization of our assets, cause us to change our business practices, increase manufacturing and operating costs or result in impairment charges or other expenses.

Changes in tax laws in the United States, the European Union and around the globe have impacted and will continue to impact our effective worldwide tax rate, which may materially affect our financial position and results of operations.

Because we manufacture and sell our products abroad, our revenue, cost of revenue, margins, operating costs and cash flows are impacted by fluctuations in foreign currency exchange rates.