SanDisk's Board Unanimously Rejects Samsung's Unsolicited Proposal

Because of this, we have proposed negotiating a replacement cross license and supply agreement, both of which would become effective in August 2009 if an announced transaction does not close. We have also requested that you commit to certain terms to ensure that a transaction has maximum certainty of closing. Despite our repeated requests Samsung has failed to address these legitimate concerns.

PROCESS

We have been clear that together with price, these critical issues of deal certainty and risk mitigation must be addressed before we provide you due diligence access to the highly confidential and competitively sensitive information that you have requested. We note that there are sizeable synergies in this transaction for Samsung, most of which you control and can determine without access to confidential information. In addition, given that Samsung operates in the same industry and that SanDisk is a public company, we are confident that Samsung possesses the necessary information to address the issues we have highlighted above prior to gaining access to confidential information. However, despite our many attempts, including those by our lead outside director, Mr. Irwin Federman, to communicate the importance of these process issues and offering a reasonable roadmap by which we both can address them, you have rejected our guidance and instead insisted on access to highly confidential information about SanDisk before these issues are resolved.

CONCLUSION

The members of the SanDisk board of directors have taken, and will continue to take, their responsibilities to SanDisks stockholders extremely seriously. We remain committed to the goal of maximizing stockholder value. As Mr. Federman has said to you on multiple occasions, including in our recent meeting in Seoul, on September 11, 2008, the SanDisk board of directors is open minded about a transaction with Samsung if it represents a price that recognizes the long-term intrinsic value of SanDisk and the significant synergies that accrue to Samsung, provides deal certainty to SanDisk and can be conducted in a process that adequately protects the interests of SanDisks stockholders. Samsungs current offer and approach falls well short on all counts. As such, we respectfully reject your proposal.

Very truly yours,

Eli Harari, PhD

Chairman of the Board and Chief Executive Officer

Forward-Looking Statements

This news release contains certain forward-looking statements, including statements about our business prospects and outlook that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others:

  • there can be no assurance that any corporate or other transaction with Samsung or any other party will be negotiated or consummated;
  • we can provide no assurance as to whether any required regulatory approvals can be obtained;
  • enforcing our patent rights may involve litigation and other uncertainties whose resolution can not be predicted;
  • our license agreement with Samsung expires in 2009 and we can not provide any assurance as to the effect of the end of our existing license term on our financial results;
  • slower than expected, or no, growth in market demand for our products including our solid state drives, or a slower adoption rate for our products in current and new markets that we are targeting including the mobile phone market,
  • future average selling price erosion that may be more severe than our expectations due to decreased demand or excess industry supply of flash memory from ourselves as well as from existing suppliers or from new competitors,
  • continued excess industry-wide supply to meet demand,
  • adverse global economic and geo-political conditions, including continued declines in the global economy, particularly in the U.S. and Europe, or continued adverse currency exchange rates particularly related to the Japanese yen,
  • any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us,
  • slower than expected expansion of our global sales channels,
  • fluctuations in operating results, unexpected yield variances and delays related to our conversion to 43-nanometer NAND flash technology or the ramp-up of the 300 millimeter flash fabrication facility,
  • unexpected yield variances in, or delays related to the ramp-up of, 3-bits per cell manufacturing,
  • lower than expected growth in the average megabyte capacity per card,
  • fluctuations in license and royalty revenues,
  • higher than anticipated operating expenses,
  • lower margins due to increased use of non-captive supply,
  • failure to develop commercially viable rewritable 3D memory technology in a timely and cost-effective manner,
  • business interruption due to earthquakes, hurricanes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products,
  • adverse results in litigation or regulatory actions affecting us, and other risks detailed from time-to-time under the caption Risk Factors and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 and our Forms 10-Q. Future results may differ materially from those previously reported. We undertake no obligation to update these forward looking statements, which speak only as of the date hereof.

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