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SanDisk Corp. (SNDK - Analyst Report) sued rival storage solutions provider SK Hynix in Santa Clara Superior Court for an alleged ‘misappropriation of trade secrets’ of a technology related to NAND flash memory. The company has filed the case under California’s Uniform Trade Secret Act for damages and pleaded an injunction against SK Hynix. 

SanDisk alleged that a former employee of SanDisk and Toshiba’s joint venture manufacturing facility in Japan, who left in 2008, had stolen technical information and provided it to SK Hynix after joining the company.

A subsequent lawsuit filed by Toshiba in Japan led to the arrest of the person concerned. Toshiba has been partnering SanDisk to innovate in the flash memory segment and any infringements related to patents or technology thefts could hamper the competitive position of both the companies against as the likes of Samsung and SK Hynix. 

SanDisk has been vigorously defending its strong portfolio of 4900 patents related to memory storage and management from any possible breaches.

Recently, SanDisk received a favorable verdict in a patent infringement lawsuit against PNY Technologies. The jury sided with SanDisk and awarded $28.5 million in damages for the breach of license agreement. The claim of damages ensures that SanDisk’s patents can be monetized through licensing agreements with other storage providers.

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

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

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

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

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

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