##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
 Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 30, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    0000-26734
 SANDISK CORPORATION
 (Exact name of registrant as
    specified in its charter)
  Delaware

77-0191793(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)601 McCarthy Blvd.
    Milpitas, California

95035(Zip Code)(Address of principal executive
    offices)   (408) 801-1000
 (Registrants telephone number, including area code)
  Title of each class

Name of each exchange on which registeredCommon Stock, $0.001 par value;
    Rights to Purchase Series A
    Junior Participating Preferred Stock

NASDAQ Global Select Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large
    accelerated
    filer  þ
    Accelerated
    filer  o
    Non-accelerated
    filer  o
    Smaller
    reporting company
    o   Rule 12b-2 o þ
      Class

Outstanding at January 31, 2008Common Stock, $0.001 par value per share

224,260,481 shares   DOCUMENTS
    INCORPORATED BY REFERENCE
  Document

Parts Into Which IncorporatedAnnual Report to Stockholders for the Fiscal Year Ended
    December 30, 2007 (Annual Report)

Parts I, II, and IVProxy Statement for the Annual Meeting of Stockholders to be
    held May 28, 2008 (Proxy Statement)

Part III




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##### 





SANDISK
    CORPORATION
  Table of
    Contents
  PageNo.PART IItem 1.


Business


3Item 1A.


Risk Factors


11Item 1B.


Unresolved Staff Comments


28Item 2.


Properties


28Item 3.


Legal Proceedings


29Item 4.


Submission of Matters to a Vote of Security
    Holders


34PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


34Item 6.


Selected Financial Data


36Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


37Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


47Item 8.


Financial Statements and Supplementary Data


47Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


47Item 9A.


Controls and Procedures


47Item 9B.


Other Information


48PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


48Item 11.


Executive Compensation


49Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


49Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


49Item 14.


Principal Accountant Fees and Services


49PART IVItem 15.


Exhibits and Financial Statement Schedules


50OTHERIndex To Financial Statements


F-1Signatures


S-1EXHIBIT 12.1EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




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PART I  ITEM 1.
    BUSINESS  Statements in this report, which are not historical facts,
    are forward-looking statements within the meaning of the federal
    securities laws. These statements may contain words such as
    expects, anticipates,
    intends, plans, believes,
    seeks, estimates or other wording
    indicating future results or expectations. Forward-looking
    statements are subject to risks and uncertainties. Our actual
    results may differ materially from the results discussed in
    these forward-looking statements. Factors that could cause our
    actual results to differ materially include, but are not limited
    to, those discussed in Risk Factors in Item 1A
    of this report, and elsewhere in this report. Our business,
    financial condition or results of operations could be materially
    adversely affected by any of these factors. We undertake no
    obligation to revise or update any forward-looking statements to
    reflect any event or circumstance that arises after the date of
    this report. References in this report to
    SanDisk®,
    we, our, and us,
    collectively refer to SanDisk Corporation, a Delaware
    corporation, and its subsidiaries. All references to years or
    annual periods are references to our fiscal years, which
    consisted of 52 weeks in 2007, 2006 and 2005.
  Overview
  Who We Are.
    Our Strategy.
    tm tm tm
 3




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tm ®
    mark-up
    Additional Information. Form 10-K, Form 10-Q, Form 8-K (http://www.sec.gov), 1-800-SEC-0330. (408) 801-1000.
 4




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Description
    of Our Business
  Industry Background.
    Our Primary Markets.
  
    Consumer.  We make and sell flash storage
    products that address multiple consumer markets. Certain flash
    storage cards are used as the film for all major brands of
    digital cameras. Our cards are also used to store video in
    solid-state digital camcorders and to store digital data in many
    other devices, such as maps in GPS devices. In addition,
    portable game devices now include advanced features that require
    high capacity memory storage cards and we provide SD cards,
    Memory Stick PRO
    Duotm
    cards and
    Cruzer®
    CrossFiretm
    line of USB drives that are all specifically packaged for the
    gaming market. Primary card formats for consumer devices include
    CF, SD, Memory
    Stick®
    and xD-Picture
    Cardtm.
    Mobile Phones.  We provide embedded,
    semi-removable and removable storage for mobile phones. We are a
    leading supplier of microSD, SD and the Memory Stick product
    line of removable storage cards used in mobile phones.
    Multimedia features in mobile phones, such as camera
    functionality, audio/MP3, games, video or internet access, have
    been increasing in popularity. These features require additional
    storage capacity in the mobile phone and transferability of data
    between devices.
    Digital Audio and Video Players.  Digital media
    players allow consumers to download, store and play music and
    video. We sell a broad line of digital media players with both
    embedded and removable memory under our
    Sansa®
    brand with varying combinations of audio and video capabilities.
    Computing.  We provide multiple flash storage
    devices and solutions for a variety of computing, industrial and
    enterprise markets. USB flash drives allow consumers to store
    computer files on keychain-sized devices and then quickly and
    easily transfer these files between laptops, desktops and other
    devices. USB flash drives are fast, easy to use, have replaced
    floppy disks and other types of external storage media, and are
    evolving into intelligent storage devices. In addition, we sell
    solid state drives that are flash-based storage devices with
    capacities currently up to 72 gigabytes. We believe solid
    state drives will become a major market for flash memory over
    the next several years as the solid state drives increasingly
    replace hard disk drives in personal computer and enterprise
    server products.  Our Sales Channels.
    
    Retail.  We ship SanDisk brand products
    directly to consumer electronics stores, office superstores,
    photo retailers, mobile phone stores, mass merchants, catalog
    and mail order companies, internet and
    e-commerce
    retailers, drug stores, supermarkets and convenience stores. We
    also sell our products to smaller or regional retailers through
    distributors. 5




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##### Table of Contents




    OEM.  Our OEM customers include manufacturers
    of mobile phones, digital cameras, PCs, GPS and other digital
    consumer devices, such as personal computers and gaming devices.
    Our products are sold directly to OEMs and through distributors.
    We support our OEM customers through our direct sales
    representatives as well as through independent
    manufacturers representatives.      Our Customers.
  Our Products.
  
    Removable Cards.  Our removable data storage
    solutions are available in almost every major form factor in our
    primary markets. For example, our CompactFlash removable cards,
    available in capacities up to 16 gigabytes, are well-suited for
    a range of consumer applications, including digital cameras. Our
    professional products include the SanDisk
    Ultra®
    and SanDisk
    Extreme®
    product lines which are designed with additional performance and
    reliability. Our ultra-small microSD removable cards, available
    in capacities up to 8 gigabytes, are designed for use in mobile
    phones.
    USB Drives.  Our
    Cruzer®
    line of USB drives, available in capacities up to 8 gigabytes,
    are highly-reliable and high-performance devices. USB Flash
    Drives, or UFDs, are used in the computing and consumer markets.
    A number of our Cruzers ship with
    U3tm
    Smart Technology, which gives the user the ability to carry
    files and application software on a secure USB drive. Also, our
    Cruzer Crossfire UFDs are specially designed to make the console
    or PC gaming experience portable. Our Professional and
    Enterprise line of UFDs are geared towards the corporate user
    and are specifically designed to support secure and authorized
    access to corporate information.
    Embedded.  Our embedded products are a set of
    reliable, high-capacity, high performance and cost-effective
    embedded flash memory drive solutions for both data and code
    storage. Our
    iNANDtm
    embedded flash product line, with capacities up to 16 gigabytes,
    are designed to respond to the increasing demand for embedded
    storage for mobile phones and other portable devices. We also
    offer high-capacity solid-state drives targeted for the personal
    computing and network server markets in capacities up to
    72 gigabytes.
    Digital Media Players.  Sansa is our branded
    line of flash-based digital media players for the digital audio
    and video player market. Many of our Sansa models offer a
    removable card slot for easy transportability of music between
    devices and storage capacity expansion. Features within our
    Sansa line of products include FM radio, voice recording and
    support for a variety of audio and video music download and
    subscription services. Sansa media players are available in
    capacities up to 32 gigabytes. 6




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Technology.
  
    high-density flash memory process, module integration, device
    design and reliability;
    securing data on a flash memory device;
    controller design;
    system-level integration;
    compact packaging; and
    low-cost system testing.      Patents and Licenses.
        Supply Chain.
  
    Silicon Sourcing.  All of our flash memory card
    products require silicon chips for the memory and controller
    components. The majority of our memory is supplied from the
    flash ventures with Toshiba and our 7




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
    Assembly and Testing.  We sort and test our
    wafers at Toshiba in Yokkaichi, Japan, and Ardentec Corporation
    in Taiwan. Our flash memory products are assembled in both our
    in-house assembly and test facility in Shanghai, China, and
    through our network of contract manufacturers, including
    StatsChipPAC Ltd., or StatsChipPAC, in China, and Silicon
    Precision Industries Co., Ltd., or SPIL, in Taiwan. Our packaged
    memory final test, card assembly and card test is performed at
    our in-house facility and at subcontractors such as SPIL and
    United Test and Assembly Center, in Taiwan, and Beautiful
    Enterprise Co., Ltd., Flextronics International, Ltd., or
    Flextronics, Global Brands Manufacturing Ltd. and StatsChipPAC,
    in China. We believe the use of our in-house assembly and test
    facility as well as subcontractors reduces the cost of our
    operations and gives us access to increased production capacity.  Ventures
    with Toshiba
    mark-up.
  Competition
    Key Competitive Advantages.
  
    we have a tradition of innovation and standards creation which
    enables us to grow the overall market for flash memory; 8




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
    our intellectual property ownership, in particular our patent
    claims and MLC manufacturing know-how, provides us certain cost
    advantages;
    our flash ventures with Toshiba provide us with a favorable cost
    structure;
    we market and sell a broader range of card formats than any of
    our competitors, which gives us an advantage in obtaining strong
    retail and OEM distribution;
    we have global retail distribution of our products through over
    222,000 worldwide retail storefronts; and
    we have worldwide leading market share in removable flash cards
    and USB flash drives.  Semiconductor Manufacturers.
  Flash Memory Card and USB Drive
    Manufacturers.
  Digital Audio/Video Player Manufacturers.
  Other Technologies.
  Employees
    Executive
    Officers
    Name

Age

PositionEli Harari


62


Chairman of the Board and Chief Executive OfficerSanjay Mehrotra


49


President and Chief Operating OfficerJudy Bruner


49


Executive Vice President, Administration and Chief Financial
    OfficerRandhir Thakur


45


Executive Vice President, Technology and Worldwide OperationsYoram Cedar


55


Executive Vice President, Mobile Business Unit and Corporate
    Engineering  9




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10




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Item 1A.
    RISK
    FACTORS  Our operating results may fluctuate significantly, which may
    adversely affect our financial condition and our stock
    price.
  
    average selling prices, net of promotions, declining at a faster
    rate than cost reductions for our products due to industry or
    SanDisk excess supply and competitive pricing pressures;
    reduction in price elasticity of demand related to pricing
    changes for some of our markets and products;
    our license and royalty revenues may decline significantly in
    the future as our existing license agreements and key patents
    expire or if licensees fail to perform on a portion or all of
    their contractual obligations, which may also lead to increased
    patent litigation costs;
    unexpected difficulties in developing, or inability to develop,
    X3, X4, 3D, or other advanced, alternative technologies or
    difficulty in bringing advanced technologies into volume
    production at cost competitive levels;
    increased purchases of non-captive flash memory, which typically
    costs more than captive flash memory and may be of less
    consistent quality;
    insufficient assembly and test capacity from our contract
    manufacturers or our Shanghai facility;
    excess supply from captive sources due to output increasing
    faster than the growth in demand resulting in excess inventory;
    unpredictable or changing demand for our products, particularly
    demand for certain types or capacities of our products or demand
    for our products in certain markets or geographies;
    addition of new competitors, expansion of supply from existing
    competitors and ourselves creating excess market supply, which
    could cause our average selling prices to decline faster than
    our costs decline;
    difficulty in forecasting and managing inventory levels,
    particularly due to noncancelable contractual obligations to
    purchase materials such as custom non-memory materials, and the
    need to build finished product in advance of customer purchase
    orders;
    timing, volume and cost of wafer production from the flash
    ventures with Toshiba as impacted by fab
    start-up
    delays and costs, technology transitions, yields or production
    interruptions;
    disruption in the manufacturing operations of suppliers,
    including suppliers of sole-sourced components;
    increased memory component and other costs as a result of
    exchange rate fluctuations to the U.S. dollar, particularly
    with respect to the Japanese yen;
    potential delays in the emergence of new markets and products
    for NAND flash memory and acceptance of our products in these
    markets;
    timing of sell-through by our distributors and retail customers;
    errors or defects in our products caused by, among other things,
    errors or defects in the memory or controller components,
    including memory and non-memory components we procure from
    third-party suppliers;
    write-downs or impairments of our investments in fabrication
    capacity, equity investments and other assets;
    impairment of goodwill and other challenges related to our
    acquisitions of msystems Ltd. and Matrix Semiconductor, Inc.;
    estimates used in calculating share-based compensation expense;
    reduced sales to our retail customers if consumer confidence
    declines or due to economic declines in the United States,
    Europe or other geographies; and
    other factors described under Risk Factors and
    elsewhere in this report. 11




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Our average selling prices, net of promotions, may decline
    faster than cost reductions due to industry or SanDisk excess
    supply, competitive pricing pressures or strategic price
    reductions initiated by us or our
    competitors.
  Sales to a small number of customers represent a significant
    portion of our revenues, and if we were to lose one of our major
    licensees or customers or experience any material reduction in
    orders from any of our customers, our revenues and operating
    results would suffer.
  Our business depends significantly upon sales through
    retailers and distributors, and if our retailers and
    distributors are not successful, we could experience substantial
    product returns, which would negatively impact our business,
    financial condition and results of operations.
  Our revenues depend in part on the success of products sold
    by our OEM customers.
 12




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The continued growth of our business depends on development
    and performance of new markets and products for NAND
    flash.
    Our strategy of investing in captive manufacturing sources
    could harm us if our competitors are able to produce products at
    lower costs or if industry supply exceeds
    demand.
  We continually seek to develop new applications, products,
    technologies and standards, which may not be widely adopted by
    consumers or, if adopted, may reduce demand by consumers for our
    older products; and our competitors seek to develop new
    standards which could reduce demand for our
    products. tm tm tm tm
 13




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We face competition from numerous manufacturers and marketers
    of products using flash memory, as well as from manufacturers of
    new and alternative technologies, and if we cannot compete
    effectively, our results of operations and financial condition
    will suffer.
 14




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
    price, quality and on-time delivery to our customers;
    product performance, availability and differentiation;
    success in developing new applications and new market segments;
    sufficient availability of supply, the absence of which could
    lead to loss of market share;
    efficiency of production;
    timing of new product announcements or introductions by us, our
    customers and our competitors;
    the ability of our competitors to incorporate standards or
    develop formats which we do not offer;
    the number and nature of our competitors in a given market;
    successful protection of intellectual property rights; and
    general market and economic conditions.    The semiconductor industry is subject to significant
    downturns that have harmed our business, financial condition and
    results of operations in the past and may do so in the
    future.
 15




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Our business and the markets we address are subject to
    significant fluctuations in supply and demand and our
    commitments to our flash ventures with Toshiba may result in
    periods of significant excess inventory.
  We depend on third-party foundries for silicon supply and any
    disruption or shortage in our supply from these sources will
    reduce our revenues, earnings and gross
    margins.
    If actual manufacturing yields are lower than our
    expectations, this may result in increased costs and product
    shortages.
 16




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and/or
  We depend on our third-party subcontractors and our business
    could be harmed if our subcontractors do not perform as
    planned.
  We have commenced production at a captive assembly and test
    manufacturing facility in China.
  In transitioning to new processes, products and silicon
    sources, we face production and market acceptance risks that may
    cause significant product delays, cost overruns or performance
    issues that could harm our business. 56-nanometer ramp-up
  Our products may contain errors or defects, which could
    result in the rejection of our products, product recalls, damage
    to our reputation, lost revenues, diverted development resources
    and increased service costs and warranty claims and
    litigation.
 17




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We and Toshiba plan to continue to expand the wafer
    fabrication capacity of the Flash Alliance business venture as
    well as form a new venture, for which we will make substantial
    capital investments, which could adversely impact our operating
    results. start-up start-up start-up
  We have an investment of approximately $159 million in
    200-millimeter wafer manufacturing assets that we expect will no
    longer be cost effective in fiscal year
    2008.
  We have a contingent indemnification obligation and guarantee
    obligations related to the flash ventures with
    Toshiba.
     18




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Seasonality in our business may result in our inability to
    accurately forecast our product purchase
    requirements.
  From time-to-time, we overestimate our requirements and build
    excess inventory, or underestimate our requirements and have a
    shortage of supply, either of which harm our financial
    results.
     19




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We are sole-sourced for a number of our critical components
    and the absence of a
    back-up
    supplier exposes our supply chain to unanticipated
    disruptions.
  Our global operations and operations at the flash ventures
    with Toshiba and third-party subcontractors are subject to risks
    for which we may not be adequately insured.
  We are exposed to significant risk from foreign currency
    fluctuations.
  We may be unable to protect our intellectual property rights,
    which would harm our business, financial condition and results
    of operations.
    
    any of our existing patents will not be invalidated;
    patents will be issued for any of our pending applications;
    any claims allowed from existing or pending patents will have
    sufficient scope or strength;
    our patents will be issued in the primary countries where our
    products are sold in order to protect our rights and potential
    commercial advantage; or
    any of our products or technologies do not infringe on the
    patents of other companies. 20




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and/or
  We may be unable to license intellectual property to or from
    third parties as needed, or renew existing licenses, which could
    expose us to liability for damages, reduce our royalty revenues,
    increase our costs or limit or prohibit us from selling
    products.
  We are currently and may in the future be involved in
    litigation, including litigation regarding our intellectual
    property rights or those of third parties, which may be costly,
    may divert the efforts of our key personnel and could result in
    adverse court rulings, which could materially harm our
    business. and/or
   21




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and/or
  time-to-time and/or
      Because of our international business and operations, we must
    comply with numerous international laws and regulations, and we
    are vulnerable to political instability and other risks related
    to international operations.
 22




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
    the need to comply with foreign government regulation;
    changes in diplomatic and trade relationships;
    reduced sales to our customers or interruption to our
    manufacturing processes in the Pacific Rim that may arise from
    regional issues in Asia;
    imposition of regulatory requirements, tariffs, import and
    export restrictions and other barriers and restrictions;
    changes in, or the particular application of, government
    regulations;
    duties
    and/or fees
    related to customs entries for our products, which are all
    manufactured offshore;
    longer payment cycles and greater difficulty in accounts
    receivable collection;
    adverse tax rules and regulations;
    weak protection of our intellectual property rights;
    delays in product shipments due to local customs
    restrictions; and
    delays in research and development that may arise from political
    unrest at our development centers in Israel.  Tower Semiconductors financial situation is
    challenging. ramp-up
    Our stock price has been, and may continue to be, volatile,
    which could result in investors losing all or part of their
    investments.
 23




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We may engage in business combinations that are dilutive to
    existing stockholders, result in unanticipated accounting
    charges or otherwise adversely affect our results of operations,
    and result in difficulties in assimilating and integrating the
    operations, personnel, technologies, products and information
    systems of acquired companies or businesses.
      Our success depends on our key personnel, including our
    executive officers, the loss of whom could disrupt our
    business.
  Terrorist attacks, war, threats of war and government
    responses thereto may negatively impact our operations,
    revenues, costs and stock price.
 24




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Natural disasters or epidemics in the countries in which we
    or our suppliers or subcontractors operate could negatively
    impact our operations.
  To manage our growth, we may need to improve our systems,
    controls, processes and procedures. We have experienced and may
    continue to experience rapid growth, which has placed, and could
    continue to place a significant strain on our managerial,
    financial and operations resources and
    personnel.
  We may need to raise additional financing, which could be
    difficult to obtain, and which if not obtained in satisfactory
    amounts may prevent us from funding flash ventures with Toshiba
    or other third parties, increasing our wafer supply, developing
    or enhancing our products, taking advantage of future
    opportunities, growing our business or responding to competitive
    pressures or unanticipated industry changes, any of which could
    harm our business.
  Anti-takeover provisions in our charter documents,
    stockholder rights plan and in Delaware law could discourage or
    delay a change in control and, as a result, negatively impact
    our stockholders.
 25




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Unanticipated changes in our tax provisions or exposure to
    additional income tax liabilities could affect our
    profitability.
  We may be subject to risks associated with environmental
    regulations.
  In the event we are unable to satisfy regulatory requirements
    relating to internal controls, or if our internal controls over
    financial reporting are not effective, our business could
    suffer.
  Our debt service obligations may adversely affect our cash
    flow.
 26




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
    increase our vulnerability to general adverse economic and
    industry conditions;
    limit our ability to obtain additional financing;
    require the dedication of a substantial portion of any cash flow
    from operations to the payment of principal of, and interest on,
    our indebtedness, thereby reducing the availability of such cash
    flow to fund our growth strategy, working capital, capital
    expenditures and other general corporate purposes;
    limit our flexibility in planning for, or reacting to, changes
    in our business and our industry; and
    place us at a competitive disadvantage relative to our
    competitors with less debt.  The accounting method for convertible debt securities with
    net share settlement, such as our 1% Senior Convertible
    Notes due 2013 may be subject to change. 14-a, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash Upon Conversion (Including Partial Cash
    Settlement)
  We have significant financial obligations related to our
    flash ventures with Toshiba, which could impact our ability to
    comply with our obligations under our 1% Senior Convertible
    Notes due 2013 and our 1% Convertible Notes due
    2035.
  The net share settlement feature of the 1% Senior
    Convertible Notes due 2013 may have adverse
    consequences.
   27




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The convertible note hedge transactions and the warrant
    option transactions may affect the value of the notes and our
    common stock.
  
    have entered into various over-the-counter cash-settled
    derivative transactions with respect to our common stock,
    concurrently with, and shortly after, the pricing of the
    notes; and
    may enter into, or may unwind, various over-the-counter
    derivatives
    and/or
    purchase or sell our common stock in secondary market
    transactions following the pricing of the notes, including
    during any observation period related to a conversion of notes.      There is pending litigation.
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES   28




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50-year
    ITEM 3.
    LEGAL
    PROCEEDINGS       29




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30




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No. 2:07-CV-52,
  and/or
 31




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No. 6:07-CV-00374-LED.
    No. 2-07-CV-396,
  No. 337-TA-619)
 32




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No. 07-C-0607-C,
  No. 07-C-0605-C,
  No. C07-0086.
 33




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market For Our Common Stock.
  High


Low2006First quarter

$
79.80


$
52.15Second quarter

$
66.20


$
49.16Third quarter

$
60.94


$
37.34Fourth quarter

$
62.24


$
42.002007First quarter

$
46.24


$
35.82Second quarter

$
49.61


$
41.48Third quarter

$
59.75


$
47.14Fourth quarter

$
55.98


$
33.15   Holders.
  Dividends.
  Issuer Purchases of Equity Securities.
  Approximate DollarTotal Number of


Value of Shares thatShares Purchased


May Yet Beas Part of Publicly


Purchased UnderTotal Number of


Average Price Paid


Announced Plans or


the Plans orPeriod

Shares Purchased(1)


per Share(2)


Programs(1)


Programs(2)October 1, 2007 to October 28, 2007





$







$
202,596,251October 29, 2007 to November 25, 2007


1,734,805



41.76



1,734,805



130,158,615November 26, 2007 to December 30, 2007


3,473,200



37.33



3,473,200



510,673Total


5,208,005



38.80



5,208,005     (1)
    
    In December 2006, we announced our intention to repurchase up to
    $300.0 million of our common stock in the open market over
    the two years following the date of authorization.(2)
    
    Does not include amounts paid for commissions. 34




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##### Table of Contents



Stock
    Performance Graph *
  Five-Year Stockholder Return Comparison.
    
  2002

2003

2004

2005

2006

2007SanDisk Corporation

$
100.00


$
289.67


$
236.68


$
595.45


$
407.87


$
317.91S&P 500 Index


100.00



125.19



138.44



142.60



162.02



168.89S&P Semiconductor Stock Index


100.00



185.15



148.90



165.54



149.07



165.31PHLX Semiconductor Index


100.00



168.20



146.15



161.72



157.82



138.28    *
    
    The material in this report is not deemed filed
    with the SEC and is not to be incorporated by reference into any
    of our filings under the Securities Act of 1933 or the
    Securities Exchange Act of 1934, whether made before or after
    the date hereof and irrespective of any general incorporation
    language in any such filing. 35




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA  SANDISK
    CORPORATION SELECTED FINANCIAL DATA
  Fiscal Years EndedDecember 30,


December 31,


January 1,


January 2,


December 28,2007(1)


2006(2)


2006(3)


2005(4)


2003(5)(In thousands, except per share data)RevenuesProduct

$
3,446,125


$
2,926,472


$
2,066,607


$
1,602,836


$
982,341License and royalty


450,241



331,053



239,462



174,219



97,460Total revenues


3,896,366



3,257,525



2,306,069



1,777,055



1,079,801Cost of product revenues


2,693,647



2,018,052



1,333,335



1,091,350



641,189Gross profit


1,202,719



1,239,473



972,734



685,705



438,612Operating income


276,514



326,334



576,582



418,591



257,038Net income

$
218,357


$
198,896


$
386,384


$
266,616


$
168,859Net income per share:Basic

$
0.96


$
1.00


$
2.11


$
1.63


$
1.17Diluted

$
0.93


$
0.96


$
2.00


$
1.44


$
1.02Shares used in per share calculations:Basic


227,744



198,929



183,008



164,065



144,781Diluted


235,857



207,451



193,016



188,837



171,616   AtDecember 30,


December 31,


January 1,


January 2,


December 28,2007


2006


2006


2005


2003(In thousands)Working capital

$
2,385,774


$
3,345,414


$
2,004,598


$
1,526,674


$
1,378,070Total assets


7,234,819



6,967,783



3,120,187



2,320,180



2,040,156Long-term convertible notes


1,225,000



1,225,000











150,000Total stockholders equity

$
4,959,617


$
4,768,134


$
2,523,791


$
1,940,150


$
1,515,872     (1)
    
    Includes share-based compensation of ($133.0) million and
    amortization of acquisition-related intangible assets of
    ($90.1) million. Also includes other-than-temporary
    impairment charges of ($10.0) million related to our
    investment in FlashVision.(2)
    
    Includes acquired in-process technology charges of
    ($225.6) million related to acquisitions of Matrix
    Semiconductor Inc. in January 2006 and msystems Ltd. in November
    2006, share-based compensation of ($100.6) million and
    amortization of acquisition-related intangible assets of
    ($27.8) million.(3)
    
    Includes other-than-temporary impairment charges of
    ($10.1) million related to our investment in Tower.(4)
    
    Includes other-than-temporary impairment charges of
    ($11.8) million related to our investment in Tower, and a
    gain from a settlement of $6.2 million from a third-party
    brokerage firm related to the fiscal 2003 unauthorized
    disposition of our investment in UMC.(5)
    
    Includes a loss of approximately ($18.3) million as a
    result of the unauthorized sale of approximately
    127.8 million shares of UMC stock, a gain of approximately
    $7.0 million related to the sale of 35 million shares
    of UMC stock, and write-downs related to the recoverability of
    our Tower wafer credits of ($3.9) million. 36




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##### Table of Contents



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATION  Overview
  Fiscal Years EndedDecember 30,


% of


December 31,


% of


January 1,


% of2007


Revenue


2006


Revenue


2006


Revenue(In thousands, except percentages)Product revenues

$
3,446,125



88.4
%

$
2,926,472



89.8
%

$
2,066,607



89.6
%License and royalty revenues


450,241



11.6
%


331,053



10.2
%


239,462



10.4
%Total revenues


3,896,366



100.0
%


3,257,525



100.0
%


2,306,069



100.0
%Cost of product revenues


2,693,647



69.1
%


2,018,052



62.0
%


1,333,335



57.8
%Gross profit


1,202,719



30.9
%


1,239,473



38.0
%


972,734



42.2
%Operating expensesResearch and development


418,066



10.7
%


306,866



9.4
%


194,810



8.5
%Sales and marketing


294,594



7.6
%


203,406



6.3
%


122,232



5.3
%General and administrative


181,509



4.7
%


159,835



4.9
%


79,110



3.4
%Write-off of acquired in-process technology










225,600



6.9
%






Restructuring


6,728



0.2
%














Amortization of acquisition-related intangible assets


25,308



0.6
%


17,432



0.5
%






Total operating expenses


926,205



23.8
%


913,139



28.0
%


396,152



17.2
%Operating income


276,514



7.1
%


326,334



10.0
%


576,582



25.0
%Other income


121,902



3.1
%


104,374



3.2
%


36,725



1.6
%Income before taxes


398,416



10.2
%


430,708



13.2
%


613,307



26.6
%Provision for income taxes


174,848



4.5
%


230,193



7.1
%


226,923



9.8
%Minority interest


5,211



0.1
%


1,619











Net income

$
218,357



5.6
%

$
198,896



6.1
%

$
386,384



16.8
%   General
      and/or
 37




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##### Table of Contents



Accounting for
    Uncertainty in Income Taxes, an interpretation of FASB Statement
    No. 109
  Critical
    Accounting Policies & Estimates
    Use of Estimates.
  Revenue Recognition, Sales Returns and Allowances and Sales
    Incentive Programs. and/or
    Inventories and Inventory
    Valuation. (first-in,
 38




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##### Table of Contents



Accounting for Variable Interest Entities. Accounting for Variable
    Interest Entities.
  Deferred Tax Assets.
    Share-Based Compensation  Employee Incentive Plans
    and Employee Stock Purchase Plans. Share-Based
    Payments
  Business Combinations. Business Combinations
 39




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##### Table of Contents



Results
    of Operations
  Product
    Revenues.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Retail

$
2,162.5



9
%

$
1,975.5



22
%

$
1,621.0OEM


1,283.6



35
%


951.0



113
%


445.6Product revenues

$
3,446.1



18
%

$
2,926.5



42
%

$
2,066.6       Geographical Product Revenues.
  FY 2007


FY 2006


FY 2005Percent of





Percent of





Percent ofRevenue


Total


Revenue


Total


Revenue


Total(In millions, except percentages)United States

$
1,193.6



35
%

$
1,259.8



43
%

$
978.0



47
%Japan


283.8



8
%


194.0



7
%


104.4



5
%EMEA


889.7



26
%


728.4



25
%


501.0



24
%APAC and other foreign countries


1,079.0



31
%


744.3



25
%


483.2



24
%Product revenues

$
3,446.1



100
%

$
2,926.5



100
%

$
2,066.6



100
%      40




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##### Table of Contents



License
    and Royalty Revenues.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)License and royalty revenues

$
450.2



36
%

$
331.1



38
%

$
239.5       Gross
    Margins.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Product gross profit

$
752.5



(17
)%

$
908.4



24
%

$
733.3Product gross margins (as a percent of product revenue)


21.8
%






31.0
%






35.5
%Total gross margins (as a percent of total revenue)


30.9
%






38.0
%






42.2
%       Research
    and Development.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Research and development

$
418.1



36
%

$
306.9



58
%

$
194.8Percent of revenue


10.7
%






9.4
%






8.5
%   start-up
   41




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##### Table of Contents



Sales
    and Marketing.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Sales and marketing

$
294.6



45
%

$
203.4



66
%

$
122.2Percent of revenue


7.6
%






6.3
%






5.3
%       General
    and Administrative.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)General and administrative

$
181.5



14
%

$
159.8



102
%

$
79.1Percent of revenue


4.7
%






4.9
%






3.4
%       Write-off
    of Acquired In-process Technology.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Write-off of acquired in-process technology


n/a






$
225.6







n/aPercent of revenue


n/a







6.9
%






n/a    42




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##### Table of Contents



Amortization
    of Acquisition-Related Intangible Assets.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Amortization of acquisition-related intangible assets

$
25.3



45
%

$
17.4







n/aPercent of revenue


0.6
%






0.5
%






n/a       Restructuring.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Restructuring

$
6.7



100
%


n/a







n/aPercent of revenue


0.2
%






n/a







n/a     Other
    Income.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005(In millions, except percentages)Interest income

$
133.4



32
%

$
101.1



136
%

$
42.8Interest expense


(16.9
)


59
%


(10.6
)


1667
%


(0.6
)Income (loss) in equity investments


(9.9
)


(248
)%


6.7



186
%


(7.8
)Other income, net


15.3



113
%


7.2



213
%


2.3Total other income, net

$
121.9



17
%

$
104.4



184
%

$
36.7      43




---



##### Table of Contents



Provision
    for Income Taxes.
  Percent





PercentFY 2007


Change


FY 2006


Change


FY 2005Provision for income taxes

$
174.8



(24
)%

$
230.2



1
%

$
226.9Effective tax rates


43.9
%






53.5
%






37.0
%         Liquidity
    and Capital Resources
  Cash Flows.
           44




---



##### Table of Contents



Liquid Assets.
  Short-Term Liquidity.
  Long-Term Requirements.
  Financing Arrangements.
    Toshiba Ventures.
   45




---



##### Table of Contents



start-up
      and/or
  Contractual
    Obligations and Off-Balance Sheet Arrangements
    Impact of
    Currency Exchange Rates
   46




---



##### Table of Contents



Recent
    Accounting Pronouncements
    ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest Rate Risk.
  Foreign Currency Risk.
  Market Risk.
    ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  page F-1.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation of Disclosure Controls and
    Procedures. Rules 13a-15(e) 15d-15(e)
 47




---



##### Table of Contents



Report of Management on Internal Control Over Financial
    Reporting. Internal
    Controls  Integrated Framework
      page F-3.
  Inherent Limitations of Disclosure Controls and Procedures
    and Internal Control over Financial Reporting.
  Changes in Internal Control over Financial
    Reporting. Rule 13a-15(f))
  ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE     48




---



##### Table of Contents




    From our main Web page, first click on Corporate and
    then on scroll down and click on Business Conduct and
    Ethics.
    Next, click on SanDisks Worldwide Code of Business
    Conduct and Ethics Policy.
    Finally, scroll down to Part IV, SanDisk Code of
    Ethics for Financial Executives.  Form 8-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES   49




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES  (a)
    Documents
    filed as part of this report  1)
    All
    financial statements  Index to Financial Statements

PageReports of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets


F-4Consolidated Statements of Income


F-5Consolidated Statements of Stockholders
    Equity


F-6Consolidated Statements of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8     2)
    Exhibits
    required by Item 601 of
    Regulation S-K   50




---



##### Table of Contents



SANDISK
    CORPORATION
  INDEX
    TO FINANCIAL STATEMENTS
  PageReports of Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets


F-4Consolidated Statements of Income


F-5Consolidated Statements of Stockholders Equity


F-6Consolidated Statements of Cash Flows


F-7Notes to Consolidated Financial Statements


F-8  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Share Based Payment Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109.
    
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM
                 
  
 F-3




---



##### Table of Contents



SANDISK
    CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  December 30,


December 31,2007


2006(In thousands, except for share and per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
833,749


$
1,580,700Short-term investments


1,001,641



1,251,493Accounts receivable from product revenues, net of allowance for
    doubtful accounts of $13,790 in fiscal year 2007 and $11,452 in
    fiscal year 2006


462,983



611,740Inventory


555,077



495,984Deferred taxes


212,255



176,007Other current assets


233,952



125,937Total current assets


3,299,657



4,241,861Long-term investments


1,060,393



457,184Property and equipment, net


422,895



317,965Notes receivable and investments in flash ventures with Toshiba


1,108,905



462,307Deferred taxes


117,130



102,100Goodwill


840,870



910,254Intangibles, net


322,023



389,078Other non-current assets


62,946



87,034Total assets

$
7,234,819


$
6,967,783LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
285,711


$
261,870Accounts payable to related parties


158,443



139,627Other current accrued liabilities


286,850



311,000Deferred income on shipments to distributors and retailers and
    deferred revenue


182,879



183,950Total current liabilities


913,883



896,447Convertible long-term debt


1,225,000



1,225,000Non-current liabilities


135,252



72,226Total liabilities


2,274,135



2,193,673Minority interest


1,067



5,976Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value, Authorized shares:4,000,000, Issued and outstanding: none






Common stock, $0.001 par value; Authorized shares:800,000,000; Issued and outstanding: 224,166,707 in fiscal year
    2007 and 226,518,283 in fiscal year 2006


224



226Capital in excess of par value


3,796,849



3,656,895Retained earnings


1,130,069



1,105,520Accumulated other comprehensive income


32,475



5,493Total stockholders equity


4,959,617



4,768,134Total liabilities and stockholders equity

$
7,234,819


$
6,967,783    F-4




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##### Table of Contents



SANDISK
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF INCOME
  Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006(In thousands, except per share amounts)Revenues:Product

$
3,446,125


$
2,926,472


$
2,066,607License and royalty


450,241



331,053



239,462Total revenues


3,896,366



3,257,525



2,306,069Cost of product revenues


2,628,838



2,007,684



1,333,335Amortization of acquisition-related intangible assets


64,809



10,368



Total cost of product revenues


2,693,647



2,018,052



1,333,335Gross profit


1,202,719



1,239,473



972,734Operating expenses:Research and development


418,066



306,866



194,810Sales and marketing


294,594



203,406



122,232General and administrative


181,509



159,835



79,110Restructuring


6,728







Write-off of acquired in-process technology






225,600



Amortization of acquisition-related intangible assets


25,308



17,432



Total operating expenses


926,205



913,139



396,152Operating income


276,514



326,334



576,582Interest income


133,355



101,088



42,835Income (loss) in equity investments


(9,949
)


6,678



(7,847
)Interest (expense) and other income (expense), net


(1,504
)


(3,392
)


1,737Total other income


121,902



104,374



36,725Income before provision for income taxes


398,416



430,708



613,307Provision for income taxes


174,848



230,193



226,923Income after taxes


223,568



200,515



386,384Minority interest


5,211



1,619



Net income

$
218,357


$
198,896


$
386,384Net income per share:Basic

$
0.96


$
1.00


$
2.11Diluted

$
0.93


$
0.96


$
2.00Shares used in computing net income per share:Basic


227,744



198,929



183,008Diluted


235,857



207,451



193,016    F-5




---



##### Table of Contents



SANDISK
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY
  Capital in





AccumulatedCommon


Common


Excess of





Other





TotalStock


Stock


Par


Retained


Comprehensive


Deferred


StockholdersShares


Par Value


Value


Earnings


Income(Loss)


Compensation


Equity(In thousands)Balance at January 2, 2005


179,964


$
180


$
1,406,373


$
520,240


$
18,893


$
(5,536
)

$
1,940,150Net income














386,384











386,384Unrealized loss on available for sale securities


















(1,901
)






(1,901
)Unrealized loss on investments in foundries


















(840
)






(840
)Foreign currency translation


















(13,517
)






(13,517
)Comprehensive income


























370,126Issuance of shares pursuant to equity plans


7,937



8



108,686















108,694Issuance of stock pursuant to employee stock purchase plan


321







6,704















6,704Deferred compensation










4,438











(4,438
)


Amortization of deferred compensation






















2,499



2,499Income tax benefit from stock options exercised










95,618















95,618Balance at January 1, 2006


188,222



188



1,621,819



906,624



2,635



(7,475
)


2,523,791Net income














198,896











198,896Unrealized income on available for sale securities


















2,315







2,315Unrealized loss on investments in foundries


















(227
)






(227
)Foreign currency translation


















770







770Comprehensive income


























201,754Issuance of shares pursuant to equity plans


4,861



5



87,049















87,054Issuance of stock pursuant to employee stock purchase plan


264







9,250















9,250Issuance of restricted stock


63























Income tax benefit from stock options exercised










61,453















61,453Share-based compensation expense and reversal of deferred
    compensation










96,415











7,475



103,890Purchased calls










(386,090
)














(386,090
)Sold Warrants










308,672















308,672Tax benefit on purchased calls










145,556















145,556Issuance of stock and equity awards related to acquisitions


33,108



33



1,686,356















1,686,389Reclass of premium on assumed msystems convertible debt










26,415















26,415Balance at December 31, 2006


226,518



226



3,656,895



1,105,520



5,493







4,768,134Net income














218,357











218,357Unrealized income on available for sale investments


















11,185







11,185Foreign currency translation


















15,797







15,797Comprehensive income


























245,339Issuance of shares pursuant to equity plans


4,724



5



87,010















87,015Issuance of stock pursuant to employee stock purchase plan


386







13,296















13,296Income tax benefit from stock options exercised










18,442















18,442Shared-based compensation expense










132,647















132,647Cumulative effect to prior year related to unrecognized tax
    benefits upon adoption of FIN 48










(4,756
)


(993
)










(5,749
)Share repurchases


(7,461
)


(7
)


(106,785
)


(192,815
)










(299,607
)Consolidated venture capital contributions










100















100Balance at December 30, 2007


224,167


$
224


$
3,796,849


$
1,130,069


$
32,475


$



$
4,959,617    F-6




---



##### Table of Contents



SANDISK
    CORPORATION
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006(In thousands)Cash flows from operating activities:Net income

$
218,357


$
198,896


$
386,384Adjustments to reconcile net income to net cash provided by
    operating activities:Deferred and other taxes


(35,188
)


(25,636
)


(1,538
)(Gain) loss on equity investments


7,844



(2,480
)


8,480Depreciation and amortization


255,743



135,585



65,774Provision for doubtful accounts


3,530



3,316



(272
)FlashVision wafer cost adjustment










(2,263
)Share-based compensation expense


133,010



100,641



Excess tax benefit from share-based compensation


(18,375
)


(57,393
)


Write-off of acquired in-process technology






225,600



Other non-cash charges (income)


4,877



(313
)


9,833Changes in operating assets and liabilities:Accounts receivable from product revenues


145,657



(115,061
)


(134,207
)Inventory


(57,586
)


(23,660
)


(135,162
)Other assets


(34,789
)


(12,094
)


(31,148
)Accounts payable trade


23,772



(64,228
)


148,234Accounts payable to related parties


20,966



24,617



24,657Other liabilities


(14,891
)


210,273



142,083Total adjustments


434,570



399,167



94,471Net cash provided by operating activities


652,927



598,063



480,855Cash flows from investing activities:Purchases of short and long-term investments


(3,717,897
)


(2,135,973
)


(807,467
)Proceeds from sale and maturities of short and long-term
    investments


3,399,583



1,497,120



722,986Notes receivable from Matrix Semiconductor, Inc.










(20,000
)Acquisition of property and equipment, net


(258,954
)


(176,474
)


(134,477
)Notes receivable proceeds (issuance), FlashVision Ltd.


37,512



23,538



(34,249
)Notes receivable from Flash Partners Ltd.


(525,252
)


(95,445
)


Notes receivable from Tower Semiconductor Ltd.






(9,705
)


Investment in Flash Partners Ltd. and Flash Alliance Ltd.


(125,547
)


(132,209
)


(21,790
)Purchased technology and other assets


(27,803
)






(4,500
)Cash acquired in business combinations, net of acquisition costs






51,087



Net cash used in investing activities


(1,218,358
)


(978,061
)


(299,497
)Cash flows from financing activities:Proceeds from issuance of convertible senior notes, net of
    issuance costs






1,125,500



Proceeds from employee stock programs


100,311



96,304



115,398Proceeds from debt financing


9,803







Purchase of convertible bond hedge






(386,090
)


Proceeds from issuance of warrants






308,672



Distribution to minority interest


(9,880
)


(4,491
)


Excess tax benefit from share-based compensation


18,375



57,393



Share repurchase programs


(299,607
)






Net cash provided by (used in) financing activities


(180,998
)


1,197,288



115,398Effect of changes in foreign currency exchange rates on cash


(522
)


1,352



1,507Net increase (decrease) in cash and cash equivalents


(746,951
)


818,642



298,263Cash and cash equivalents at beginning of the year


1,580,700



762,058



463,795Cash and cash equivalents at end of the year

$
833,749


$
1,580,700


$
762,058Supplemental disclosure of cash flow information:Cash paid for income taxes

$
(193,300
)

$
(81,100
)

$
(164,345
)Cash paid for interest expense

$
(15,168
)

$
(6,965
)

$
(17
)Non-cash financing and investing activities:Issuance of shares in a business combination

$



$
1,607,450


$
    F-7




---



##### Table of Contents



Notes to
    Consolidated Financial Statements  Note 1:
    Organization
    and Summary of Significant Accounting Policies  Organization and Nature of Operations.
  Basis of Presentation.
  Principles of Consolidation.
  Reclassification.
  Use of Estimates.
  Revenue Recognition, Sales Returns and Allowances and Sales
    Incentive Programs. and/or
    No. 01-9, (EITF 01-9), Accounting for Consideration Given by a Vendor to a Customer
    (Including a Reseller of the Vendors Products)
 F-8




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounts Receivable and Allowance for Doubtful
    Accounts.
    Income Taxes.
  Accounting for Uncertainty in
    Income Taxes  An Interpretation of FASB Statement
    No. 109.
  Foreign Currency.
  Cash Equivalents, Short and Long-Term
    Investments. first-in,
   F-9




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Property and Equipment.
  Variable Interest Entities. Accounting for Variable Interest Entities
  Equity Investments.
  Inventories and Inventory
    Valuation. (first-in,
      Other Long-Lived Assets. Accounting for Impairment of Disposal of Long-Lived Assets.
 F-10




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Fair Value of Financial Instruments.
  As of December 30, 2007


As of December 31, 2006Carrying


Estimated Fair


Carrying


Estimated FairValue


Value


Value


Value1% Convertible senior notes due 2013

$
1,150


$
913


$
1,150


$
9951% Convertible notes due 2035


75



85



75



98Restricted long-term securities










10



15   Advertising Expenses.
  Research and Development Expenses.
  Note 2:
    Recent
    Accounting Pronouncements  SFAS No. 160. Noncontrolling
    Interests in Consolidated Financial Statements, an amendment of
    ARB No. 51
  SFAS No. 141 (revised Business Combinations
 F-11




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    SFAS No. 157. Fair Value
    Measurements
  No. FAS 157-1 FAS 157-1), Application of FASB Statement No. 157 to FASB Statement
    No. 13 and Other Accounting Pronouncements That Address
    Fair Value Measurements for Purposes of Lease Classification or
    Measurement Under Statement 13 No. FAS 157-2 FAS 157-2), Effective Date of FASB Statement No. 157 FAS 157-1 Accounting for Leases FAS 157-2 FAS 157-1 FAS 157-2
  SFAS No. 159. Establishing the
    Fair Value Option for Financial Assets and Liabilities
  EITF Issue
    No. 07-3. No. 07-3 (EITF 07-3), Accounting for Advance Payments for Goods or Services to be
    Received for Use in Future Research and Development Activities. EITF 07-3 EITF 07-3
  FSP No. APB
    14-a. 14-a, Accounting for Convertible Debt Instruments That May Be
    Settled in Cash Upon Conversion (Including Partial Cash
    Settlement)
 F-12




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 3:
    Balance
    Sheet Information  Available-for-Sale
    Investments.
  December 30, 2007


December 31, 2006Gross


Gross








Gross


GrossUnrealized


Unrealized


Market





Unrealized


Unrealized


MarketBook Value


Gains


Losses


Value


Book Value


Gains


Losses


ValueU.S. Treasury and agency securities

$
142,667


$
269


$



$
142,936


$
846,560


$
257


$
(962
)

$
845,855U.S. Corporate notes and bonds


340,458



11







340,469



975,597







(423
)


975,174Municipal notes and bonds


2,094,585



12,203



(109
)


2,106,679



1,207,611



224



(200
)


1,207,635Equity investments


89,678



6,266



(10,965
)


84,979



90,350



14,528



(4,938
)


99,940Total available-for-sale investments

$
2,667,388


$
18,749


$
(11,074
)

$
2,675,063


$
3,120,118


$
15,009


$
(6,523
)

$
3,128,604     December 30,


December 31,2007


2006Cash on hand

$
220,720


$
160,773Cash equivalents


613,029



1,419,927Short-term investments


1,001,641



1,251,493Long-term investment


1,060,393



457,184Total

$
2,895,783


$
3,289,377     Less than 12 MonthsGrossUnrealizedMarket Value


LossesU.S. Treasury and agency securities

$
39,859


$
Municipal notes and bonds


66,034



(109
)Equity investments


60,436



(10,965
)Total

$
166,329


$
(11,074
)    F-13




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
        EstimatedCost


Fair ValueShort and long-term investments:Due in one year or less

$
980,157


$
981,513Due after one year through five years


984,536



995,541Total

$
1,964,693


$
1,977,054   Accounts Receivable from Product Revenues,
    net.
  December 30,


December 31,2007


2006Trade accounts receivable

$
1,027,588


$
1,056,616Related party accounts receivable


4,725



41,708Allowance for doubtful accounts


(13,790
)


(11,452
)Price protection, promotions and other activities


(555,540
)


(475,132
)Total accounts receivable from product revenues, net

$
462,983


$
611,740     Allowance for Doubtful Accounts.
  December 30,


December 31,


January 1,2007


2006


2006Balance, beginning of period

$
11,452


$
8,050


$
8,462Additions charged to costs and expenses


3,519



6,142



376Deductions (write-offs)


(1,181
)


(2,740
)


(788
)Balance, end of period

$
13,790


$
11,452


$
8,050   Inventory.
  December 30,


December 31,2007


2006Raw material

$
197,077


$
157,163Work-in-process


94,283



64,009Finished goods


263,717



274,812Total inventory

$
555,077


$
495,984  F-14




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Other Current Assets.
  December 30,


December 31,2007


2006Royalty and other receivables

$
103,802


$
97,130Prepaid expenses


21,874



22,276Other current assets


108,276



6,531Total other current assets

$
233,952


$
125,937   Property and Equipment.
  December 30,


December 31,2007


2006Machinery and equipment

$
649,075


$
483,134Software


68,664



54,411Building


32,972



24,148Capital land lease


7,272



3,197Furniture and fixtures


6,382



5,604Leasehold improvements


33,419



13,957Property and equipment, at cost


797,784



584,451Accumulated depreciation and amortization


(374,889
)


(266,486
)Property and equipment, net

$
422,895


$
317,965     Notes Receivable and Investments in the Flash Ventures with
    Toshiba.
  December 30,


December 31,2007


2006Notes receivable, FlashVision Ltd.

$



$
38,229Notes receivable, Flash Partners Ltd.


639,834



92,421Investment in FlashVision Ltd.


159,146



159,144Investment in Flash Partners Ltd.


177,529



168,210Investment in Flash Alliance Ltd.


132,396



4,303Total notes receivable and investments in the flash ventures
    with Toshiba

$
1,108,905


$
462,307    F-15




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Other Current Accrued Liabilities.
  December 30,


December 31,2007


2006Accrued payroll and related expenses

$
94,220


$
61,050Income taxes payable


56,945



110,009Research and development liability, related party


8,000



5,850Other accrued liabilities


127,685



134,091Total other current accrued liabilities

$
286,850


$
311,000   Non-current liabilities.
  December 30,


December 31,2007


2006Deferred tax liability

$
14,479


$
27,257Income taxes payable


79,608



Accrued restructuring


11,891



13,799Other non-current liabilities


29,274



31,170Total non-current liabilities

$
135,252


$
72,226   Warranties.
  December 30,


December 31,


January 1,2007


2006


2006Balance, beginning of period

$
15,338


$
11,257


$
11,380Additions and adjustments to cost of product revenues


8,303



6,606



6,033Usage


(4,979
)


(2,525
)


(6,156
)Balance, end of period

$
18,662


$
15,338


$
11,257     Accumulated Other Comprehensive
    Income.
  December 30,


December 31,2007


2006Accumulated net unrealized gain (loss) on:Available-for-sale investments

$
8,657


$
(2,528
)Foreign currency translation


23,818



8,021Total accumulated other comprehensive income

$
32,475


$
5,493    F-16




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 4:
    Goodwill
    and Other Intangible Assets  Goodwill.
  Balance at December 31, 2006

$
910,254Goodwill adjustment


(69,384
)Balance at December 30, 2007

$
840,870     Goodwill and Other
    Intangible Assets
  Other Intangible Assets.
  December 30, 2007


December 31, 2006Gross





Net


Gross





NetCarrying


Accumulated


Carrying


Carrying


Accumulated


CarryingAmount


Amortization


Amount


Amount


Amortization


AmountCore technology

$
311,801


$
(78,863
)

$
232,938


$
311,801


$
(18,135
)

$
293,666Developed product technology


12,900



(4,689
)


8,211



12,900



(2,103
)


10,797Trademarks


4,000



(4,000
)






4,000



(911
)


3,089Backlog


5,000



(5,000
)






5,000



(1,139
)


3,861Supply agreement


2,000



(2,000
)






2,000



(46
)


1,954Customer relationships


80,100



(23,907
)


56,193



80,100



(6,008
)


74,092Acquisition-related intangible assets


415,801



(118,459
)


297,342



415,801



(28,342
)


387,459Technology licenses and patents


39,243



(14,562
)


24,681



7,388



(5,769
)


1,619Total

$
455,044


$
(133,021
)

$
322,023


$
423,189


$
(34,111
)

$
389,078    F-17




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Estimated Amortization ExpensesTechnologyAcquisition-related


Licenses andFiscal periods

Intangible Assets


Patents(In thousands)2008

$
76,229


$
6,8242009


71,724



6,1992010


71,529



4,8752011


64,809



3,0232012


12,529



2,3752013 and thereafter


522



1,385Total

$
297,342


$
24,681   Note 5:
    Financing
    Arrangements    December 30,


December 31,2007


2006(In millions)1% Convertible Senior Notes due 2013

$
1,150


$
1,1501% Convertible Notes due 2035

$
75


$
75   1% Convertible Senior Notes Due 2013.
  business-day trading-day
   F-18




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
        
    Convertible Bond Hedge.  Counterparties agreed
    to sell to the Company up to approximately 14 million
    shares of the Companys common stock, which is the number
    of shares initially issuable upon conversion of the
    1% Notes due 2013 in full, at a price of $82.36 per share.
    The convertible bond hedge transaction will be settled in net
    shares and will terminate upon the earlier of the maturity date
    of the 1% Notes due 2013 or the first day none of the
    1% Notes due 2013 remains outstanding due to conversion or
    otherwise. Settlement of the convertible bond hedge in net
    shares, based on the number of shares issued upon conversion of
    the 1% Notes due 2013, on the expiration date would result
    in the Company receiving net shares equivalent to the number of
    shares issuable by the Company upon conversion of the
    1% Notes due 2013. Should there be an early unwind of the
    convertible bond hedge transaction, the number of net shares
    potentially received by the Company will depend upon 1) the
    then existing overall market conditions, 2) the
    Companys stock price, 3) the volatility of the
    Companys stock, and 4) the amount of time remaining
    before expiration of the convertible bond hedge. The convertible
    bond hedge transaction cost of $386.1 million has been
    accounted for as an equity transaction in accordance with
    Emerging Issues Task Force
    No. 00-19,
    (EITF 00-19),
    Accounting for Derivative Financial Statements Indexed to,
    and Potentially Settled in, a Companys Own Stock. The
    Company recorded a tax benefit of approximately
    $145.6 million in stockholders equity from the
    deferred tax asset related to the convertible bond hedge.
    Sold Warrants.  The Company received
    $308.7 million from the same counterparties from the sale
    of warrants to purchase up to approximately 14 million
    shares of the Companys common stock at an exercise price
    of $95.03 per share. The warrants have an expected life of
    5.5 years and expire in August 2013. At expiration, the
    Company may, at its option, elect to settle the warrants on a
    net share basis. As of December 30, 2007, the warrants had
    not been exercised and remained outstanding. The value of the
    warrants has been classified as equity because they meet all the
    equity classification criteria of
    EITF 00-19.  1% Convertible Notes Due 2035.
    30-day
   F-19




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounting for
    Convertible Debt and Debt Issued with Stock Purchase
    Warrants
  Note 6:
    Share
    Repurchase Program    Note 7:
    Concentrations
    of Risk and Segment Information  Geographic Information and Major
    Customers.
      Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006Revenues:United States

$
1,227,303


$
1,272,927


$
986,529Japan


301,970



231,835



138,507EMEA


890,340



728,355



500,998APAC and other foreign countries


1,476,753



1,024,408



680,035Total

$
3,896,366


$
3,257,525


$
2,306,069   F-20




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  As ofDecember 30,


December 31,


January 1,2007


2006


2006Long-Lived Assets:United States

$
227,630


$
182,749


$
126,346Japan


375,398



397,011



286,859China


116,936



24,149



240Israel


173,613



50,355



8,868Other foreign countries


3,981



5,555



368Total

$
897,558


$
659,819


$
422,681     Customer and Supplier Concentrations.
      Concentration of Credit Risk.
 F-21




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Off-Balance Sheet Risk.
  Note 8:
    Compensation
    and Benefits  Share-Based
    Benefit Plans
  2005 Incentive Plan. 4-year
  1995 Stock Option Plan and 1995 Non-Employee Directors Stock
    Option Plan.
  2005 Employee Stock Purchase Plan. non-United
 F-22




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  msystems Ltd. 1996 Section 102 Stock Option/Stock
    Purchase Plan and 2003 Stock Option and Restricted Stock
    Incentive Plan.
  Matrix Semiconductor, Inc. 2005 Stock Incentive Plan, 1999
    Stock Plan and 1998 Long-term Incentive Plan.
  Adoption
    of SFAS 123(R)
  Share-Based Payment Accounting for Stock-Based
    Compensation Accounting for Stock
    Issued to Employees Accounting For
    Stock-Based Compensation  Transition and
    Disclosure Accounting For Stock-Based
    Compensation
   F-23




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Valuation Assumptions.
  December 30,


December 31,


January 1,2007


2006


2006Option Plan SharesDividend yield


None



None



NoneExpected volatility


0.44



0.52



0.52Risk-free interest rate


4.44
%


4.63
%


3.94
%Expected lives


3.4 years



3.7 years



4.5 yearsEstimated annual forfeiture rate


7.59
%


7.74
%


Weighted average fair value at grant date

$
15.84


$
25.44


$
13.03Employee Stock Purchase Plan SharesDividend yield


None



None



NoneExpected volatility


0.43



0.52



0.47Risk-free interest rate


5.08
%


4.96
%


2.69
%Expected lives


1/2
    year



1/2
    year



1/2
    yearWeighted average fair value at exercise date

$
12.75


$
16.73


$
7.60  F-24




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock Options and SARs.
  WeightedAverageWeighted


RemainingAverage


Contractual


AggregateShares


Exercise Price


Term (Years)


Intrinsic Value(In thousands, except exercise price and contractual term)Options outstanding at January 2, 2005


22,656


$
17.02Granted


6,367



28.37Exercised


(7,940
)


13.75Forfeited


(767
)


24.37Options outstanding at January 1, 2006


20,316



21.57






$
260,187Granted


6,021



58.41Exercised


(4,861
)


17.91






$
205,618Forfeited


(851
)


41.05Expired


(40
)


40.29Options and SARs assumed through acquisition


5,807



30.57Options and SARs outstanding at December 31, 2006


26,392



31.97



6.7


$
392,469Granted


5,848



43.65Exercised


(4,678
)


20.24






$
124,816Forfeited


(1,728
)


45.99Expired


(277
)


56.03Options and SARs outstanding at December 30, 2007


25,557



35.59



5.8


$
165,185Options and SARs vested and expected to vest after
    December 30, 2007, net of forfeitures


23,870



34.91



5.8


$
163,723Options and SARs exercisable at December 30, 2007


12,901


$
27.12



5.2


$
147,722     Restricted Stock Units.
 F-25




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted AverageGrant Date Fair


AggregateShares


Value


Intrinsic ValueNon-vested share units at January 2, 2005





$



$
Granted


105



42.19Non-vested share units at January 1, 2006


105



42.19



3,489Granted


516



57.69Vested


(97
)


52.21



4,865Forfeited


(65
)


63.85Restricted stock units assumed through acquisition


139



72.83Non-vested share units at December 31, 2006


598



58.71



25,740Granted


132



44.86Vested


(184
)


56.21



8,136Forfeited


(47
)


67.10Non-vested share units at December 30, 2007


499


$
55.20


$
16,735     Employee Stock Purchase Plans.
  Share-Based Compensation Expense.
  December 30,


December 31,2007


2006(In thousands)Share-based compensation expense by caption:Cost of product sales

$
14,743


$
7,991Research and development


49,194



40,999Sales and marketing


31,722



21,617General and administrative


37,351



30,034Total share-based compensation expense

$
133,010


$
100,641Share-based compensation expense by type of award:Stock options and SARs

$
111,360


$
85,862Restricted stock


16,674



11,181ESPP


4,976



3,598Total share-based compensation expense

$
133,010


$
100,641    F-26




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Pro Forma
    Disclosures
    January 1, 2006(In thousands, except pershare amountsNet income, as reported

$
386,384Fair value method expense, net of related tax


(52,629
)Pro forma net income

$
333,755Earnings per share as reported:Basic

$
2.11Diluted

$
2.00Pro forma earnings per share:Basic

$
1.82Diluted

$
1.73   Note 9:
    Restructuring      LeaseSeverance and


Obligations andBenefits


Other Charges


TotalRestructuring provision

$
5,970


$
758


$
6,728Adjustments


(56
)






(56
)Cash paid


(5,631
)


(423
)


(6,054
)Accrual balance at December 30, 2007

$
283


$
335


$
618    F-27




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 10:
    Income
    Taxes    Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006Current:Federal

$
108,636


$
174,320


$
159,147State


19,958



27,788



24,592Foreign


81,442



63,841



32,323210,036



265,949



216,062Deferred:Federal


(22,670
)


(22,623
)


15,663State


(654
)


(9,585
)


(3,413
)Foreign


(11,864
)


(3,548
)


(1,389
)(35,188
)


(35,756
)


10,861Provision for income taxes

$
174,848


$
230,193


$
226,923       Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006United States

$
454,147


$
193,845


$
500,727International


(55,731
)


236,863



112,580Total

$
398,416


$
430,708


$
613,307     Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006U.S. federal statutory rate


35.0
%


35.0
%


35.0
%State taxes, net of federal benefit


3.7



3.1



2.2Non-deductible share-based compensation expense


5.0



2.9



Write-off of acquired in-process technology






18.3



Tax-exempt interest income


(5.7
)


(2.7
)


(0.8
)Foreign earnings at other than U.S. rates


(4.0
)


(2.9
)


Foreign losses not benefited


7.8



0.6



Other


2.1



(0.8
)


0.643.9
%


53.5
%


37.0
%    F-28




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    December 30,


December 31,2007


2006Deferred tax assets:Deferred revenue recognized for tax purposes

$
48,932


$
57,435Accruals and reserves not currently deductible


170,279



148,427Depreciation and amortization not currently deductible


56,967



44,807Deductible original issue discount


119,358



136,715Deductible share-based compensation


37,959



19,840Net operating loss and tax credit carryforwards


48,731



53,018Other


28,709



27,995Valuation allowance on deferred tax assets


(67,354
)


(60,119
)Total deferred tax assets

$
443,581


$
428,118Deferred tax liabilities:Acquired intangibles

$
(42,477
)

$
(63,772
)Unrealized gain on investments


(23,553
)


(28,285
)U.S. taxes provided on unremitted earnings of foreign
    subsidiaries


(62,647
)


(88,590
)Total deferred tax liabilities


(128,677
)


(180,647
)Net deferred tax assets

$
314,904


$
247,471         Accounting for Uncertainty in
    Income Taxes, an interpretation of FASB Statement No. 109,
 F-29




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Balance at January 1, 2007

$
38,629Additions based on tax positions related to current year


30,983Additions for tax positions of prior years


3,051Reductions for tax positions of prior years


(2,161
)Reductions due to expiration of statute of limitations


(308
)Balance at December 30, 2007

$
70,194     and/or
     F-30




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Note 11:
    Net
    Income per Share    Fiscal Years EndedDecember 30,


December 31,


January 1,2007


2006


2006Numerator:Numerator for basic net income per share:Net income

$
218,357


$
198,896


$
386,384Denominator for basic net income per share:Weighted average common shares outstanding


227,744



198,929



183,008Basic net income per share

$
0.96


$
1.00


$
2.11Numerator for diluted net income per share:Net income

$
218,357


$
198,896


$
386,384Interest on the 1% Convertible Notes due 2035, net of tax


469



58



Net income for diluted income per share

$
218,826


$
198,954


$
386,384Denominator for diluted net income per share:Weighted average common shares


227,744



198,929



183,008Incremental common shares attributable to exercise of
    outstanding employee stock options, restricted stock, restricted
    stock units and warrants (assuming proceeds would be used to
    purchase common stock)


6,101



8,284



10,008Effect of dilutive 1% Convertible Notes due 2035


2,012



238



Shares used in computing diluted net income per share


235,857



207,451



193,016Diluted net income per share

$
0.93


$
0.96


$
2.00Anti-dilutive shares excluded from net income per share
    calculation


40,133



33,381



98     Note 12:
    Commitments,
    Contingencies and Guarantees  FlashVision.
 F-31




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
      Flash Partners.
    Flash Alliance.
     F-32




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Toshiba Foundry.
  TwinSys.
  Business Ventures and Foundry Arrangement with
    Toshiba.
  Other Silicon Sources.
  Subcontractors.
  Off-Balance
    Sheet Liabilities
    Master Lease Agreements by Execution Date

Lease Amounts


Expiration(Yen in billions)


(Dollars in millions)FlashVisionJune 2006

¥
3.6


$
32



2009Flash PartnersDecember 2004

¥
16.1


$
143



2010December 2005


12.4



110



2011June 2006


11.8



105



2011September 2006


41.2



364



2011March 2007


28.5



252



2012¥
110.0


$
974Flash AllianceNovember 2007

¥
15.0


$
133



2012Total indemnification or guarantee obligations

¥
128.6


$
1,139  F-33




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    PurchaseOptionPayment of


Exercise Price


IndemnificationPrincipal


at Final Lease


or GuaranteeAnnual Installments

Amortization


Terms


Amount(In millions)Year 1

$
231


$



$
231Year 2


234



13



247Year 3


191



53



244Year 4


118



177



295Year 5


34



88



122Total indemnification or guarantee obligations

$
808


$
331


$
1,139   FlashVision.
    Flash Partners.
 F-34




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Flash Alliance.
  Guarantees
  Indemnification Agreements.
     F-35




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Contractual
    Obligations and Off-Balance Sheet Arrangements
  Contractual Obligations.
  More than 52 - 3 Years


4-5 Years


Years1 Year or Less


(Fiscal 2009


(Fiscal 2011


(BeyondTotal


(Fiscal 2008)


and 2010)


and 2012)


Fiscal 2012)Operating leases

$
39,673


$
8,468


$
15,700


$
7,472


$
8,033FlashVision reimbursement for certain other costs including
    depreciation


137,021
(3)


64,429



69,673



2,919



Flash Partners reimbursement for certain other costs including
    depreciation


1,915,456
(3)


581,359



890,771



401,235



42,091Flash Alliance fabrication capacity expansion and reimbursement
    for certain other costs including depreciation and
    start-up


2,526,791
(3)


945,551



877,081



612,275



91,884Toshiba research and development


10,000
(3)


10,000











Capital equipment purchases commitments


55,697



55,697











Convertible notes principal and
    interest(1)


1,307,170



12,250



24,500



24,500



1,245,920Operating expense commitments


21,384



21,384











Noncancelable production purchase
    commitments(2)


250,544
(3)


250,544











Total contractual cash obligations

$
6,263,736


$
1,949,682


$
1,877,725


$
1,048,401


$
1,387,928   Off-Balance
    Sheet Arrangements.
  As ofDecember 30,2007Indemnification of FlashVision equipment
    lease(4)

$
32,106Guarantee of Flash Partners equipment
    leases(5)

$
974,126Guarantee of Flash Alliance equipment
    lease(5)

$
132,837   F-36




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    (1)
    
    In May 2006, the Company issued and sold $1.15 billion in
    aggregate principal amount of 1% Senior Convertible Notes
    due May 15, 2013. The Company will pay cash interest at an
    annual rate of 1%, payable semi-annually on May 15 and November
    15 of each year until calendar year 2013. In November 2006,
    through its acquisition of msystems, the Company assumed
    msystems $75 million in aggregate principal amount of
    1% Convertible Notes due March 15, 2035. The Company
    will pay cash interest at an annual rate of 1%, payable
    semi-annually on March 15 and September 15 of each year until
    calendar year 2035.(2)
    
    Includes Toshiba foundries, FlashVision, Flash Partners, Flash
    Alliance, related party vendors and other silicon source vendor
    purchase commitments.(3)
    
    Includes amounts denominated in Japanese yen, which are subject
    to fluctuation in exchange rates prior to payment and have been
    translated using the exchange rate at December 30, 2007.(4)
    
    The Companys contingent indemnification obligation is
    3.6 billion Japanese yen, or approximately $32 million
    based upon the exchange rate at December 30, 2007.(5)
    
    The Companys guarantee obligation, net of cumulative lease
    payments, is 125.0 billion Japanese yen, or approximately
    $1.11 billion based upon the exchange rate at
    December 30, 2007.


Fiscal Year Ending:2008

$
9,3152009


9,0822010


8,0612011


6,0472012


4,1442013 and beyond


8,03344,682Sublease income to be received in the future under noncancelable
    subleases


(5,009
)Net operating leases

$
39,673   Foreign Currency Exchange and Other
    Contracts.
 F-37




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 13:
    Related
    Parties and Strategic Investments  Toshiba.
  Flash Ventures with Toshiba. Consolidation of
    Variable Interest Entities,
      F-38




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  December 30,


December 31,2007


2006(Unaudited)Current assets

$
870,018


$
448,520Property, plant and equipment and other assets


3,331,584



1,652,706Total assets


4,201,602



2,101,226Current liabilities


1,958,322



1,169,543Long-term liabilities

$
1,280,471


$
262,063     Twelve Months EndedDecember 30,


December 31,


January 1,2007


2006


2006(Unaudited)Net
    sales(1)

$
2,435,114


$
1,462,024


$
795,464Gross profit


13,587



8,894



4,027Net income

$
927


$
1,730


$
763     (1)
    
    Net sales represent sales to both the Company and Toshiba.  TwinSys.
  Tower Semiconductor.
  Flextronics.
 F-39




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Solid State Storage Solutions LLC.
  Note 14:
    Business
    Acquisitions  msystems Ltd. Business
    Combinations
  Fair value of SanDisk common stock issued

$
1,365,150Estimated fair value of options and stock appreciation rights
    assumed


115,670Direct transaction costs


14,918Total purchase price

$
1,495,738       Vested Options

Unvested Options

SARsValuation method

Black-Scholes-Merton

Black-Scholes-Merton

Binomial ModelDividend yield

None

None

NoneExpected volatility

0.50

0.50

0.50Risk-free interest rate

5.04%

4.68%

4.67%Weighted average expected life

0.9 Years

3.4 Years

3.7 YearsFair value

$46.48

$46.48

$46.48Exercise cap

N/A

N/A

$104.76    F-40




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Net Tangible Assets.
  Cash

$
41,657Short-term investments


100,341Accounts receivable


163,705Inventory


134,677Property and equipment, net


35,872Other assets


108,889Total assets acquired


585,141Accounts payable


(133,263
)Other liabilities


(184,068
)Total liabilities assumed


(317,331
)Net tangible assets acquired

$
267,810   Purchase Price Allocation.
    Net tangible assets acquired

$
267,810Goodwill


693,730Other identifiable intangible assets:Core technology


235,500Trademarks


4,000Customer relationships


66,000Backlog


5,000Supply agreement


2,000Total other identifiable intangible assets


312,500Acquired in-process technology


186,000Deferred tax liability


(19,641
)Assumed unvested share-based awards to be expensed


55,339Total purchase price

$
1,495,738   Acquisition-Related Restructuring.
 F-41




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    In-process Technology.
    Matrix Semiconductor, Inc. ®
  Fair value of SanDisk common stock issued

$
242,303Estimated fair value of options assumed


33,169Cash consideration


20,000Direct transaction costs


907Total purchase price

$
296,379     Acquisition-Related Restructuring.
 F-42




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    In-process Technology.
      Pro Forma Results.
  Twelve Months EndedDecember 31,


January 1,2006


2006Net revenues

$
4,030,645


$
2,925,431Net income

$
340,097


$
295,305Net income per share:Basic

$
1.49


$
1.39Diluted

$
1.41


$
1.29     Note 15:
    Stockholders
    Rights Plan   F-43




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    Note 16:  Litigation
         F-44




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
       F-45




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
      No. 2:07-CV-52,
  and/or
 F-46




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    No. 6:07-CV-00374-LED.
    No. 2-07-CV-396,
  No. 337-TA-619)
 F-47




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
    No. 07-C-0607-C,
  No. 07-C-0605-C,
 F-48




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  No. C07-0086.
  Note 17:
    Condensed
    Consolidating Financial Statements     F-49




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Operations
    For the fiscal year ended December 30, 2007
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2)


Adjustments


Company(In thousands)Total revenues

$
2,193,435


$



$
311,441


$
4,993,166


$
(3,601,676
)

$
3,896,366Total cost of revenues


1,253,220







299,885



4,601,636



(3,461,094
)


2,693,647Gross margin


940,215







11,556



391,530



(140,582
)


1,202,719Total operating expenses


513,827







147,678



401,464



(136,764
)


926,205Operating income (loss)


426,388







(136,122
)


(9,934
)


(3,818
)


276,514Total other income (expense)


106,491



1



23,324



(12,215
)


4,301



121,902Income (loss) before taxes


532,879



1



(112,798
)


(22,149
)


483



398,416Provision (benefit) for income taxes


163,422







7,539



3,895



(8
)


174,848Minority interest










5,211











5,211Equity in net income (loss) of consolidated subsidiaries


9,005







(2,816
)


3,836



(10,025
)


Net income (loss)

$
378,462


$
1


$
(128,364
)

$
(22,208
)

$
(9,534
)

$
218,357     (1)
    
    This represents legal entity results which exclude any
    subsidiaries required to be consolidated under GAAP.(2)
    
    This represents all other legal subsidiaries. F-50




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Operations
    For the Fiscal Year Ended December 31, 2006
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2)


Adjustments


Company(In thousands)Total revenues

$
2,101,601


$



$
89,411


$
4,165,416


$
(3,098,903
)

$
3,257,525Total cost of revenues


1,280,102







84,763



3,664,513



(3,011,326
)


2,018,052Gross profits


821,499







4,648



500,903



(87,577
)


1,239,473Total operating expenses


467,259







212,735



324,587



(91,442
)


913,139Operating income


354,240







(208,087
)


176,316



3,865



326,334Total other income (expense)


96,415



5



3,282



44,925



(40,253
)


104,374Income (loss) before taxes


450,655



5



(204,805
)


221,241



(36,388
)


430,708Provision (benefit) for income taxes


229,376







(1,485
)


2,302







230,193Minority interest










1,619











1,619Equity in net income (loss) of consolidated subsidiaries


207,438







528



26,077



(234,043
)


Net income (loss)

$
428,717


$
5


$
(204,411
)

$
245,016


$
(270,431
)

$
198,896     (1)
    
    This represents legal entity results which exclude any
    subsidiaries required to be consolidated under GAAP.(2)
    
    This represents all other legal subsidiaries. F-51




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheets
    As of December 30, 2007
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2),


Adjustments


Company(In thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
389,337


$
215


$
90,639


$
353,558


$



$
833,749Short-term investments


1,001,641



















1,001,641Accounts receivable, net


215,049







32,497



223,624



(8,187
)


462,983Inventory


104,626







30,238



423,850



(3,637
)


555,077Other current assets


759,872







221,932



823,387



(1,358,984
)


446,207Total current assets


2,470,525



215



375,306



1,824,419



(1,370,808
)


3,299,657Property and equipment, net


222,038







34,975



165,882







422,895Other non-current assets


2,684,232



71,998



925,424



1,350,985



(1,520,372
)


3,512,267Total assets

$
5,376,795


$
72,213


$
1,335,705


$
3,341,286


$
(2,891,180
)

$
7,234,819LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
48,386


$



$
34,462


$
362,138


$
(832
)

$
444,154Other current accrued liabilities


587,129



601



66,353



1,253,114



(1,437,468
)


469,729Total current liabilities


635,515



601



100,815



1,615,252



(1,438,300
)


913,883Convertible long-term debt


1,150,000



75,000















1,225,000Non-current liabilities


67,895







11,428



60,839



(4,910
)


135,252Total liabilities


1,853,410



75,601



112,243



1,676,091



(1,443,210
)


2,274,135Minority interest










1,067











1,067Total stockholders equity


3,523,385



(3,388
)


1,222,395



1,665,195



(1,447,970
)


4,959,617Total liabilities and stockholders equity

$
5,376,795


$
72,213


$
1,335,705


$
3,341,286


$
(2,891,180
)

$
7,234,819     (1)
    
    This represents legal entity results which exclude any
    subsidiaries required to be consolidated under GAAP.(2)
    
    This represents all other legal subsidiaries. F-52




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheets
    As of December 31, 2006
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2)


Adjustments


Company(In thousands)ASSETSCurrent Assets:Cash and cash equivalents

$
1,165,473


$
48


$
71,839


$
340,291


$
3,049


$
1,580,700Short-term investments


1,192,084







26,294



2,681



30,434



1,251,493Accounts receivable, net


256,801







55,864



313,407



(14,332
)


611,740Inventory


106,772







71,839



318,154



(781
)


495,984Other current assets


497,513







74,434



253,129



(523,132
)


301,944Total current assets


3,218,643



48



300,270



1,227,662



(504,762
)


4,241,861Property and equipment, net


182,750







34,870



100,345







317,965Other non-current assets


1,735,998



71,789



1,184,165



595,333



(1,179,328
)


2,407,957Total assets

$
5,137,391


$
71,837


$
1,519,305


$
1,923,340


$
(1,684,090
)

$
6,967,783LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
43,910


$



$
46,349


$
312,219


$
(981
)

$
401,497Other current accrued liabilities


515,042



226



59,287



512,525



(592,130
)


494,950Total current liabilities


558,952



226



105,636



824,744



(593,111
)


896,447Convertible long-term debt


1,150,000



75,000















1,225,000Non-current liabilities


18,029







32,229



29,770



(7,802
)


72,226Total liabilities


1,726,981



75,226



137,865



854,514



(600,913
)


2,193,673Minority interest










5,976











5,976Total stockholders equity


3,410,410



(3,389
)


1,375,464



1,068,826



(1,083,177
)


4,768,134Total liabilities and stockholders equity

$
5,137,391


$
71,837


$
1,519,305


$
1,923,340


$
(1,684,090
)

$
6,967,783     (1)
    
    This represents legal entity results which exclude any
    subsidiaries required to be consolidated under GAAP.(2)
    
    This represents all other legal subsidiaries. F-53




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Condensed
    Consolidating Statements of Cash Flows
    For the fiscal year ended December 30, 2007
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2)


Adjustments


Company(In thousands)Net cash provided by (used in) operating activities

$
389,524


$
167


$
2,211


$
264,074


$
(3,049
)

$
652,927Net cash provided by (used in) investing activities


(983,835
)






26,087



(260,610
)






(1,218,358
)Net cash provided by (used in) financing activities


(180,921
)






(9,880
)


9,803







(180,998
)Effect of changes in foreign currency exchange rates on cash


(904
)






382











(522
)Net increase (decrease) in cash and cash equivalents


(776,136
)


167



18,800



13,267



(3,049
)


(746,951
)Cash and cash equivalents at beginning of period


1,165,473



48



71,839



340,291



3,049



1,580,700Cash and cash equivalents at end of period

$
389,337


$
215


$
90,639


$
353,558


$



$
833,749   Condensed
    Consolidating Statements of Cash Flows
    For the fiscal year ended December 31, 2006
  CombinedOther


Non-Parent


Subsidiary


Guarantor


Guarantor


Consolidating


TotalCompany(1)


Issuer(1)


Subsidiary(1)


Subsidiaries(2)


Adjustments


Company(In thousands)Net cash provided by (used in) operating activities

$
458,012


$



$
(15,214
)

$
330,074


$
(174,809
)

$
598,063Net cash provided by (used in) investing activities


(1,039,970
)


48



73,927



(12,066
)






(978,061
)Net cash provided by (used in) financing activities


1,201,779







(3,222
)


(1,269
)






1,197,288Effect of changes in foreign currency exchange rates on cash


1,542







247



(437
)






1,352Net increase (decrease) in cash and cash equivalents


621,363



48



55,738



316,302



(174,809
)


818,642Cash and cash equivalents at beginning of period


544,110







16,101



23,989



177,858



762,058Cash and cash equivalents at end of period

$
1,165,473


$
48


$
71,839


$
340,291


$
3,049


$
1,580,700     (1)
    
    This represents legal entity results which exclude any
    subsidiaries required to be consolidated under GAAP.(2)
    
    This represents all other legal subsidiaries. F-54




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
   Note 18:
    Supplementary
    Financial Data (Unaudited)  Fiscal Quarters EndedApril 1,


July 1,


September 30,


December 30,2007


2007


2007


2007(In thousands, except per share data)2007RevenuesProduct

$
689,357


$
719,991


$
918,810


$
1,117,967License and royalty


96,729



107,041



118,613



127,858Total revenues


786,086



827,032



1,037,423



1,245,825Gross
    profit(1)


194,936



223,713



342,320



441,750Operating income
    (loss)(1)


(19,517
)


13,584



109,151



173,296Net income (loss)

$
(575
)

$
28,484


$
84,638


$
105,810Net income (loss) per shareBasic(2)

$
(0.00
)

$
0.12


$
0.37


$
0.47Diluted(2)

$
(0.00
)

$
0.12


$
0.36


$
0.45   Fiscal Quarters EndedApril 2,


July 2,


October 1,


December 31,2006


2006


2006


2006(In thousands, except per share data)2006RevenuesProduct

$
537,728


$
636,675


$
673,189


$
1,078,880License and royalty


85,532



82,510



78,196



84,815Total revenues


623,260



719,185



751,385



1,163,695Gross
    profit(1)


238,393



289,008



296,040



416,032Operating
    income(1)


57,925



128,542



128,327



11,540Net income (loss)

$
35,115


$
95,641


$
103,281


$
(35,141
)Net income (loss) per shareBasic(2)

$
0.18


$
0.49


$
0.53


$
(0.17
)Diluted(2)

$
0.17


$
0.47


$
0.51


$
(0.17
)     (1)
    
    Includes the following charges related to share-based
    compensation, amortization of acquisition-related intangible
    assets and charges related to acquisitions of Matrix in January
    2006 and msystems in November 2006. The Company received
    business interruption proceeds of $21.8 million, which were
    recorded as a reduction to cost of product revenue as a result
    of a power outage in fiscal 2006 related to Flash Ventures.  Fiscal Quarters EndedApril 1,


July 1,


September 30,


December 30,2007


2007


2007


2007(In thousands)Share-based compensation


31,219



36,970



34,127



30,693Amortization of acquisition-related intangible assets


30,162



21,633



19,182



19,140Business interruption recovery










(16,812
)


(4,962
)Total

$
61,381


$
58,603


$
36,497


$
44,871   F-55




---



##### Table of Contents



Notes to
    Consolidated Financial
    Statements  (Continued)
  Fiscal Quarters EndedApril 2,


July 2,


October 1,


December 31,2006


2006


2006


2006(In thousands)Write-off of acquired in-process technology

$
39,600


$



$



$
186,000Share-based compensation


18,786



25,870



25,192



30,793Amortization of acquisition-related intangible assets


3,715



4,432



4,432



15,221Total

$
62,101


$
30,302


$
29,624


$
232,014   (2)
    
    Quarterly earnings per share figures may not total to yearly
    earnings per share, due to rounding and fluctuations in the
    number of options included or omitted from diluted calculations
    based on the stock price or option strike prices.  Note 19:
    Subsequent
    Events    start-up
 F-56




---



##### Table of Contents



SIGNATURES      By:
    /s/  Judy
    Bruner        POWER OF
    ATTORNEY
  Form 10-K,
    Signature

Title

DateBy:

/s/  Eli
    Harari(Dr. Eli
    Harari)

Chairman of the Board and Chief Executive Officer (Principal
    Executive Officer)

February 22, 2008By:

/s/  Judy
    Bruner(Judy
    Bruner)

Executive Vice President, Administration and Chief Financial
    Officer (Principal Financial and Accounting Officer)

February 22, 2008By:

/s/  Irwin
    Federman(Irwin
    Federman)

Vice Chairman of the Board and Lead Independent Director

February 20, 2008By:

/s/  Steven
    J. Gomo(Steven
    J. Gomo)

Director

February 20, 2008By:

/s/  Eddy
    W. Hartenstein(Eddy
    W. Hartenstein)

Director

February 20, 2008By:

/s/  Catherine
    P. Lego(Catherine
    P. Lego)

Director

February 20, 2008By:

/s/  Michael
    E. Marks(Michael
    E. Marks)

Director

February 20, 2008By:

/s/  James
    D. Meindl(James
    D. Meindl)

Director

February 20, 2008  S-1




---



##### Table of Contents



INDEX TO
    EXHIBITS
  ExhibitNumber

Exhibit Title2
.2

Agreement and Plan of Merger, dated as of July 30, 2006, by
    and among the Registrant, Project Desert Ltd. and msystems
    Ltd.(22)3
.1

Restated Certificate of Incorporation of the Registrant.(2)3
.2

Certificate of Amendment of the Restated Certificate of
    Incorporation of the Registrant dated December 9, 1999.(4)3
.3

Certificate of Amendment of the Restated Certificate of
    Incorporation of the Registrant dated May 11, 2000.(6)3
.4

Certificate of Amendment to the Amended Restated Certificate of
    Incorporation of the Registrant dated May 26, 2006.(24)3
.5

Amended and Restated Bylaws of the Registrant dated
    July 25, 2007.(19)3
.6

Certificate of Designations for the Series A Junior
    Participating Preferred Stock, as filed with the Delaware
    Secretary of State on April 24, 1997.(3)3
.7

Amendment to Certificate of Designations for the Series A
    Junior Participating Preferred Stock, as filed with the Delaware
    Secretary of State on September 24, 2003.(12)4
.1

Reference is made to Exhibits 3.1, 3.2, 3.3, and
    3.4.(2),(4),(6),(24)4
.2

Rights Agreement, dated as of September 15, 2003, between
    the Registrant and Computershare Trust Company, Inc.(11)4
.3

Amendment No. 1 to Rights Agreement by and between the
    Registrant and Computershare Trust Company, Inc., dated as
    of November 6, 2006.(27)4
.4

SanDisk Corporation Form of Indenture (including notes).(20)4
.5

Indenture (including form of Notes) with respect to the
    Registrants 1.00% Convertible Senior Notes due 2013
    dated as of May 15, 2006 by and between the Registrant and
    The Bank of New York.(21)10
.1

Form of Indemnification Agreement entered into between the
    Registrant and its directors and officers.(2)10
.2

License Agreement between the Registrant and Dr. Eli
    Harari, dated September 6, 1988.(2)10
.3

SanDisk Corporation 1995 Stock Option Plan, as Amended and
    Restated January 2, 2002.(9),(*)10
.4

SanDisk Corporation 1995 Non-Employee Directors Stock Option
    Plan, as Amended and Restated as of January 2, 2004.(10),(*)10
.5

Registration Rights Agreement, dated as of January 18,
    2001, by and between the Registrant, The Israel Corporation,
    Alliance Semiconductor Ltd., Macronix International Co., Ltd.
    and Quick Logic Corporation.(5)10
.6

Consolidated Shareholders Agreement, dated as of
    January 18, 2001, by and among the Registrant, The Israel
    Corporation, Alliance Semiconductor Ltd. and Macronix
    International Co., Ltd.(5)10
.7

Agreement, dated as of September 28, 2006, by and among the
    Registrant, Bank Leumi Le Israel B.M., a banking corporation
    organized under the laws of the State of Israel, The Israel
    Corporation Ltd., Alliance Semiconductor Corporation and
    Macronix International Co. Ltd.(26)10
.8

Agreement, dated as of September 28, 2006, by and among the
    Registrant, Bank Hapoalim B.M., a banking corporation organized
    under the laws of the State of Israel, The Israel Corporation
    Ltd., Alliance Semiconductor Corporation and Macronix
    International Co. Ltd.(26)10
.9

Amendment No. 3 to Payment Schedule of
    Series A-5
    Additional Purchase Obligations, Waiver of
    Series A-5
    Conditions, Conversion of
    Series A-4
    Wafer Credits and Other Provisions, dated as of
    November 11, 2003, by and between the Registrant, Tower
    Semiconductor Ltd. and the other parties thereto.(12)10
.10

New Master Agreement, dated as of April 10, 2002, by and
    between the Registrant and Toshiba Corporation.(7),(1)10
.11

Amendment to New Master Agreement, dated and effective as of
    August 13, 2002 by and between the Registrant and Toshiba
    Corporation.(8),(1)10
.12

New Operating Agreement, dated as of April 10, 2002, by and
    between the Registrant and Toshiba Corporation.(7),(1) E-1




---



##### Table of Contents



ExhibitNumber

Exhibit Title10
.13

Indemnification and Reimbursement Agreement, dated as of
    April 10, 2002, by and between the Registrant and Toshiba
    Corporation.(7),(1)10
.14

Amendment to Indemnification and Reimbursement Agreement, dated
    as of May 29, 2002 by and between the Registrant and
    Toshiba Corporation.(7)10
.15

Amendment No. 2 to Indemnification and Reimbursement
    Agreement, dated as of May 29, 2002 by and between the
    Registrant and Toshiba Corporation.(25)10
.16

Form of Change of Control Agreement entered into by and between
    the Registrant and each of the following officers of the
    Registrant: the Chief Financial Officer; the Executive Vice
    President and Chief Operating Officer; the Sr. Vice President
    and General Manager, Retail Business Unit; the Sr. Vice
    President, Engineering; the Vice President and General Counsel;
    and the Vice President, Business Development.(13),(*)10
.17

Change of Control Agreement entered into by and between the
    Registrant and the President and Chief Executive Officer of the
    Registrant.(13),(*)10
.18

Flash Partners Master Agreement, dated as of September 10,
    2004, by and among the Registrant and the other parties
    thereto.(14),(1)10
.19

Flash Alliance Master Agreement, dated as of July 7, 2006,
    by and among the Registrant, Toshiba Corporation and SanDisk
    (Ireland) Limited.(23),(+)10
.20

Operating Agreement of Flash Partners Ltd., dated as of
    September 10, 2004, by and between SanDisk International
    Limited and Toshiba Corporation.(14),(1)10
.21

Operating Agreement of Flash Alliance, Ltd., dated as of
    July 7, 2006, by and between Toshiba Corporation and
    SanDisk (Ireland) Limited.(23),(+)10
.22

Mutual Contribution and Environmental Indemnification Agreement,
    dated as of September 10, 2004, by and among the Registrant
    and the other parties thereto.(14),(1)10
.23

Flash Alliance Mutual Contribution and Environmental
    Indemnification Agreement, dated as of July 7, 2006, by and
    between Toshiba Corporation and SanDisk (Ireland)
    Limited.(23),(+)10
.24

Patent Indemnification Agreement, dated as of September 10,
    2004 by and among the Registrant and the other parties
    thereto.(14),(1)10
.25

Patent Indemnification Agreement, dated as of July 7, 2006,
    by and among the Registrant and the other parties
    thereto.(23),(+)10
.26

Master Lease Agreement, dated as of December 24, 2004, by
    and among Mitsui Leasing & Development, Ltd., IBJ
    Leasing Co., Ltd., and Sumisho Lease Co., Ltd. and Flash
    Partners Ltd.(15),(1)10
.27

Master Lease Agreement, dated as of September 22, 2006, by
    and among Flash Partners Limited Company, SMBC Leasing Company,
    Limited, Toshiba Finance Corporation, Sumisho Lease Co., Ltd.,
    Fuyo General Lease Co., Ltd., Tokyo Leasing Co., Ltd., STB
    Leasing Co., Ltd. and IBJ Leasing Co., Ltd.(23),(+)10
.28

Guarantee Agreement, dated as of December 24, 2004, by and
    between the Registrant and Mitsui Leasing &
    Development, Ltd.(15)10
.29

Guarantee Agreement, dated as of September 22, 2006, by and
    among the Registrant, SMBC Leasing Company, Limited and Toshiba
    Finance Corporation.(23)10
.30

Amended and Restated SanDisk Corporation 2005 Incentive
    Plan.(25),(*)10
.31

SanDisk Corporation Form of Notice of Grant of Stock
    Option.(16),(*)10
.32

SanDisk Corporation Form of Notice of Grant of Non-Employee
    Director Automatic Stock Option (Initial Grant).(16),(*)10
.33

SanDisk Corporation Form of Notice of Grant of Non-Employee
    Director Automatic Stock Option (Annual Grant).(16),(*)10
.34

SanDisk Corporation Form of Stock Option Agreement.(16),(*)10
.35

SanDisk Corporation Form of Automatic Stock Option
    Agreement.(16),(*)10
.36

SanDisk Corporation Form of Restricted Stock Unit Issuance
    Agreement.(16),(*)10
.37

SanDisk Corporation Form of Restricted Stock Unit Issuance
    Agreement (Director Grant).(16),(*) E-2




---



##### Table of Contents



ExhibitNumber

Exhibit Title10
.38

SanDisk Corporation Form of Restricted Stock Award
    Agreement.(16),(*)10
.39

SanDisk Corporation Form of Restricted Stock Award Agreement
    (Director Grant).(16),(*)10
.40

Form of Amendment to Change of Control Agreement for those
    officers of the Registrant who are party to such
    Agreement.(17),(*)10
.41

Guarantee Agreement between the Registrant, IBJ Leasing Co.,
    Ltd., Sumisho Lease Co., Ltd., and Toshiba Finance
    Corporation.(18)10
.42

Guarantee Agreement, dated as of June 20, 2006, by and
    between the Registrant, IBJ Leasing Co., Ltd., Sumisho Lease
    Co., Ltd. and Toshiba Finance Corporation.(25)10
.43

Basic Lease Contract between Flash Partners Yugen Kaisha, IBJ
    Leasing Co., Ltd., Sumisho Lease Co., Ltd., and Toshiba Finance
    Corporation.(18),(+)10
.44

Basic Lease Contract, dated as of June 20, 2006, by and
    between Flash Partners Yugen Kaisha, IBJ Leasing Co., Ltd.,
    Sumisho Lease Co., Ltd. and Toshiba Finance Corporation.(25),(+)10
.45

Sublease (Building 3), dated as of December 21, 2005 by and
    between Maxtor Corporation and the Registrant.(25)10
.46

Sublease (Building 4), dated as of December 21, 2005 by and
    between Maxtor Corporation and the Registrant.(25)10
.47

Sublease (Building 5), dated as of December 21, 2005 by and
    between Maxtor Corporation and the Registrant.(28)10
.48

Sublease (Building 6), dated as of December 21, 2005 by and
    between Maxtor Corporation and the Registrant.(25)10
.49

Form of Second Amendment to Change of Control Agreement for
    those officers of the Registrant who are party to such
    Agreement.(29)12
.1

Computation of ratio of earnings to fixed charges. (**)21
.1

Subsidiaries of the Registrant(**)23
.1

Consent of Independent Registered Public Accounting Firm(**)31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(**)31
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002(**)32
.1

Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(**)32
.2

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002(**)     *
    
    Indicates management contract or compensatory plan or
    arrangement.**
    
    Filed herewith.***
    
    Furnished herewith.+
    
    Confidential treatment has been requested with respect to
    certain portions hereof.1.
    
    Confidential treatment granted as to certain portions of these
    exhibits.2.
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-1
    (No. 33-96298).3.
    
    Previously filed as an Exhibit to the Registrants Current
    Report on Form
    8-K/A dated
    April 18, 1997.4.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended June 30, 2000.5.
    
    Previously filed as an Exhibit to the Registrants
    Schedule 13(d) dated January 26, 2001.6.
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-3
    (No. 333-85686).7.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended June 30, 2002.8.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended September 30, 2002.9.
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-8
    (No. 333-85320).10.
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form S-8
    (No. 333-112139). E-3




---



##### Table of Contents



11.
    
    Previously filed as an Exhibit to the Registrants
    Registration Statement on
    Form 8-A
    dated September 25, 2003.12.
    
    Previously filed as an Exhibit to the Registrants 2003
    Annual Report on
    Form 10-K.13.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended June 27, 2004.14.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended September 26, 2004.15.
    
    Previously filed as an Exhibit to the Registrants 2004
    Annual Report on
    Form 10-K.16.
    
    Previously filed as an Exhibit to the Registrants Current
    Report on Form
    8-K dated
    June 3, 2005.17.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended July 3, 2005.18.
    
    Previously filed as an Exhibit to the Registrants 2005
    Annual Report on
    Form 10-K.19.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-K
    dated July 27, 2007.20.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-K
    dated May 9, 2006.21.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-K
    dated May 15, 2006.22.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-K/A
    dated August 1, 2006.23.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended October 1, 200624.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-K
    dated June 1, 2006.25.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended July 2, 2006.26.
    
    Previously filed as an Exhibit to the Registrants
    Schedule 13(d)/A dated October 12, 2006.27.
    
    Previously filed as an Exhibit to the Registrants
    Form 8-A/A
    dated November 8, 2006.28.
    
    Previously filed as an Exhibit to the Registrants 2006
    Annual Report on
    Form 10-K.29.
    
    Previously filed as an Exhibit to the Registrants
    Form 10-Q
    for the quarter ended July 1, 2007. E-4