Dr. Eli Harari President & Chief Executive Officer Judy Bruner, Executive Vice-President of Administration & CFO

Doug Rudisch, Brookside Capital Vijay Rakesh, Oppenheimer Sam Doctor, J.P.Morgan. Craig Ellis, Citigroup Satya Chillara, American Technology Research Daniel Gelbtuch, CIBC World Markets Mark Edelstone, Morgan & Stanley Jim Cavallo, Goldman Sachs Gurinder Kalra, Bear Stearns

Good afternoon and welcome to the Financial Teleconference for SanDisk® Corporation for the Fourth Quarter of 2005. I am Lori Barker Padon, SanDisk® Director of Investor Relations. Today with me is Eli Harari, President and Chief Executive Officer, SanDisk® and Judy Bruner, Executive Vice-President of Administration and CFO. The agenda for today’s teleconference is as follows. Eli will serve with remarks on SanDisk® and trends in our market, Judy will follow up with our fourth quarter financial results and future guidance. We will conclude the teleconference with your questions. An audio replay of this conference call, a copy of today’s prepared comments including metrics will be made available on SanDisk® Investor Relations website. By now all of you have seen our press release with the associated Form 8-K filed this afternoon. I would like to remind everyone that today’s comments including our question and answer session will include forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended in Section 21E of the Securities and Exchange Act of 1934, as amended, that are based on our current expectations. Forward-looking statements in this teleconference are generally identified by words such as believe, anticipate and impact, may, will, and other similar expression. In addition any statements that refer to expectations, projections and other characterizations for future events and circumstances are forward-looking statements. There are significant risks and uncertainties that could cause our actual results to differ materially from those expressed in these forward-looking statements. The risks and uncertainties are detailed in our Form 10-K of fiscal 2004 or Form 10-Q in our press release and Form 8-K. Listeners are cautioned not to place undue reliance on those forward-statements, which speak only as of the date hereof. We do not intend to update information contained in this teleconference. Now, I would like to turn the call over our CEO, Eli Harari Eli Harari, President & Chief Executive Officer: Thank you Lori. I want to first thank our customers, our shareholders, our dedicated employees, our strategic partners and our suppliers for sharing our vision which has helped shaped SanDisk® in 2005 into a world top leader and market. As the number one worldwide market leader for portable consumer storage solutions we are inspired and energized to continue growing SanDisk® in the coming years. We have relentless focus on the large scale of the opportunities ahead of us. And we believe that it is good as 2005 was for us, our fundamentals in 2006 are even better due to our investments in 2005 and the expanding market opportunities that are opening up for us in 2006. Our remarks will address our Business Outlook in 2006. Judy remarks will provide you our fourth quarter results and guidance. And on February 23, we will have our Annual Analyst meeting, which will be webcast and we will provide more details on our Market, Technology, IP and Business strategies. Removable comps storage for handsets is roughly becoming one of our most important new markets. We are pleased with our strong penetration as the Top 10 Handset OEM as well as with the major mobile network operators worldwide. In the past three quarters, our sales of mobile cards increased from 3 million units in Q2 to over 5 million units in Q3 to approximately 11 million units in fourth quarter. Mobile card bundles and Handset OEMs have completely reinvigorated our OEM business and are reminiscent of our best period from the Digital Camera OEM bundling days. In the fourth quarter the star performers in the mobile card line up were the MicroSD which since it’s adoption by SD association has seen rapid gains over all other mobile card formats as well as Memory Stick PRO Duo™ which has been successful due to the popularity of Walkman Handset product line from Sony Ericsson. We expect to see continuing strong growth in our handset business in 2006 and beyond. We are also particularly pleased with our fourth quarter sales of MP3 players in the US retail market, despite a hugely competitive landscape against well known brand names, we have clear Number Two market share in the US. This market has become one of the largest applications for NAND flash memory and our MP3 revenues more than quadrupled from the prior quarter. As for other emerging flash markets, the January Consumer Electronic Show we gave a real sense of the phenomenal possibilities for flash storage. Motorola were showing radio cell phone with song recording capability, FM Radio showed their satellite radio with MP3 recording, playback, the Xbox 360 with Flash drive, BREW GPS systems was shown with maps and flash cards and SanDisk® showed the cool new 6 Gigabyte Sansa™ e 200 with color display, audio, video, FM radio, subscription services, and removable MicroSD card and removable rechargeable battery. In 2006, we intend to capitalize on the growing consumer awareness of the SanDisk® brand through increasing significantly our investment in building and commodity globally with SanDisk® brand. We did new market driving new demand, let’s move now to Industry Supply. Early in 2005, it was widely expected that regard NAND would materialize in the second half of 2005. Which turned out, of course not to be the case primarily because of the huge demand of Flash memory in audio players as well as accelerated consumption of flash memory in handset, portable gaming none of which was fully anticipated by anyone including ourselves. This new demand was to a large extent propelled by the steep decline in the cost and hence the price of NAND Flash and more specifically towards the lower cost of NAND/MLC which made it possible for flash to achieve the crossover point needed to display it’s Microdrives in audio player. In 2005, Toshiba® and SanDisk® executed exceptionally well the 70 nanometer transition on 200 mm wafers as well as the 300 mm production ramp in Fab3. Today we are leading in high volume production of the 8 gigabit NAND/MLC chip. Fab3 is ramping production at a rapid rate and has already achieved the cost crossover point with the 200 mm production, one quarter ahead of our guidance from just three months ago. In the fourth quarter, our shipments of 70 nanometer bits and 300 mm bits were inline with our guidance. In the first quarter, Q1, we expect 70 nanometer bit to comprise more than 50% of our total collective output as our collective output itself continues to grow. In Q1 2006, we will also begin converting Fab3 capacity from 90 nanometer MLC to 70 nanometer MLC. We expect these steps will give up a steep cost reduction curve that will allow us to continue to be highly cost competitive in 2006. We try to continue to investing aggressively in 2006 in R&D for 55 nanometer and 45 nanometer NAND MLC, in controller technology and in accelerating the technology roadmap of the 3D memory technology that which we acquired with Matrix Semiconductor. We regards to Fab3 capacity expansion we are evaluating with our partner Toshiba®, timing for capacity addition beyond 48,751 wafers per month which we had previously discussed. It is reasonable to assume that the progress to ramp Fab3 to it’s maximum capacity and we will update you in due course of additional CapEx requirements to support our 50% share of these Fab3 capacity investments. Additionally due to the significant lead times associated with planning, building and ramping new advanced NAND Fab, we have started the process of evaluating with Toshiba®, our combined demand for additional NAND capacity in 2008 and beyond. Toshiba® are discussing Fab expansion options and considering timing and other requirement for a possible new advance NAND Fab beyond Fab3. We see substantial new capacity coming upstream from our sales and competition in 2006. And we believe it will be largely matched by growth in demand in the markets that we have discussed. We are excited that the number of large scale engines for growth. Although in 2005 we have shown it is difficult to ultimately gauge the rate of growth in any particular market or in any specific quarter. At the same time, it is importance that we take proactive steps to stimulate consumer preferences to move to higher capacity. Accordingly, we have initiated key strategic price move of approximately 25% to 30% early in this quarter to make 2006 ‘Year of the Gigabyte’. European and pricing actions have already taken place and in early February similar pricing moves would be instituted in America. These strategic pricing actions are similar those we did in 2004, which were extremely beneficial in stimulating electricity in 2004 and 2005. Consumers typically have responded favorably to such pricing moves with a 52 to 90 day alive. On the IP front we expect 2006 to be the busy year as we continue to aggressively protect and grow our IP portfolio. At the end of 2005 we had more than 500 US private spending mostly relating to advancement NAND/MLC as well as second generation cost storage solution and systems. In addition we are extremely pleased with the portfolio of 124 issued CapEx and 140 patent applications, which we acquired with Matrix. These patents represent we believe key fundamental elements of three dimensional semiconductor memory of arrays and as such have proportionately immense value in future years. Current semiconductor memories including NAND and NOR flash are manufactured in two dimensional arrays and may sometimes it next decade become prohibitively difficult to scale. When that happens Matrix’s 3D technology patents could be the foundation for future semiconductor storage in the post modern era. In summary the fourth quarter was a very strong finish to a great 2005 and we anticipate 2006 to be a year of continuing strong growth and revenues, profits and market share. Judy.

Thank you Eli and good afternoon everyone. There is no question in that 2005 was a fantastic year for SanDisk®, for all of 2005 revenue grew 30% and net income grew 45%. Our ASP per megabyte declined 52% leading to the emergence and growth of new applications for NAND flash. Our megabyte sold increased 166% and this growth could have been higher if we had more supply. We were able to reduce cost at a rate faster than the decline in ASP leading to expansion of our gross margin and operating margin. Our full year operating margin was a record 25% and the consistency of our operating model was notable with Q4 2005 representing the 13th consecutive quarter of operating margins above 20%. Our fourth quarter product revenue was up 35% year-over-year and 29% sequentially. Megabyte sold grew 49% sequentially at the high end of our previous forecast and ASP per megabyte declined 13% slightly less than we had previously anticipated in part due to the modest growth in average capacities and a strong mix of digital audio players which carry a slight in higher price per megabyte. As is typical in the fourth quarter sequential growth was strongest in the retail channel where our revenue was up 31% over the third quarter. Our OEM revenue grew a robust 22% sequentially based on the strength of handset business. Handsets have now displaced Digital Still Cameras as the mainstay of our OEM business, with cards for handset accounting for 76% of our fourth quarter OEM revenue. For the fourth quarter the OEM channel contributed 23% of our product revenue up from 19% in the year ago quarter. On a geographic basis our product revenue mix in Q4 was 54% Americas, 24% Europe and 22% other international regions. License and royalty revenue of $67 million was inline with our previous estimate and up 63% year-over-year and 12% sequentially for the full year our license and royalty revenue increased 37% to $239 million. Our revenue by end market continued to diversify in 2005. Revenue from the handset market increased from 6% of our total revenue in 2004 to 13 % of our total revenue in 2005. Revenue from the digital audio market grew from 1% of total revenue in 2004 to 6% in 2005. Gaming revenue grew from essentially nothing in 2004 to 3% in 2005 and our revenue from the digital camera market moved from 65% of our total revenue in 2004 to approximately 52% in 2005. Product gross margin in Q4 of 34.4% was up 2.4 point on a year-over-year basis and down 2.8 sequentially as we had expected. The key variables contributing to this sequential gross margin reduction included one, our ASP for megabyte came down 13% in Q4 compared to the very moderate 5% in Q3. Second we began generating in revenue in Q4 from product built in Q3 with early production 300 mm 90 nanometer wafers which carried a higher cost structure than the high yielding 200 mm 90 nanometer wafers from which we had build the product generated revenue in Q3. Third we had a strong mix of MP3 products in Q4 and MP3 products carry a lower than average gross margin percent due to a higher mix of non memory components in the built up material. And finally on the positive side our non-captive mix came down from 39% in Q3 to 35% in Q4 providing a favorable impact on Q4. For the full year our non-captive mix was approximately 35% the same level as 2004. For all of 2005 our product gross margin was 35.5% an impressive increase over 2004 is 31.9% gross margin. Operating expenses for Q4 of a 104 million grew a modest 5% sequentially. The growth was concentrated in sales in marketing driven by holiday branding and merchandising costs as well as variable marketing and commission cost tied to higher volume. Our GNA costs were down sequentially primarily due to lower legal cost. For the full year our operating expenses were 17.2% of revenue toward the higher end of the our 5% to 18% target financial model due to Fab3 R&D startup cost in the first half of the year. Operating income for Q4 was a record $198 million up 57% year-over-year with an operating margin of 26.4% compare to 23% in Q4 of last year. Our full year operating margin of 25% is particularly impressive given the startup cost associated with ramping in Fab3. Other income of $14 million increased by $2 million from the prior quarter due to higher interest rates on our cash investments as well as higher cash balances. Our effective tax rate remained at 37% resulting in record quarterly net income of $134 million and record quarterly EPS of $0.68. Turning to the balance sheet we ended the quarter with just under $1.7 billion of cash in short term investments. For the full year our cash investments balance grew by $375 million and the business generated cash from operations of $481 million. During 2005 we invested $134 million in capital equipment primarily for back end assembly and tests and for R&D. We invested $56 million in Flash Vision and Flash Partners, which was quite bit less than we had anticipated due to the timing of payments by the joint ventures and as a result of prioritizing usage of attractively price operating leases to fund Fab3 equipment. At the end of the year our guarantee of operating leases stood at approximately $203 million for Flash Partners and approximately $75 million for Flash Vision. In December Flash Partners closed a second trance of operating lease financing which is expected to contribute approximately $150 million to SanDisk® funding obligations for Fab3 expansion in the first half of 2006. During the fourth quarter we invested $22 million in Flash Partners and we also invested $54 million in SanDisk® capital equipment. Again primarily for backend of assembly and test. Accounts receivable increased $118 million seasonally from the previous quarter with the dollar growth all related to sales volume and DSO stood at 44 days at the end of the year. Inventory grew by $45 million due to a successfully steep ramp in FAB33 wafers sold out across the quarter. Channel inventories stood at a normal level between 7 and 8 weeks at the end of the quarter. I’ll now turn to our outlook for Q1 in 2006. Let me remind you that the forward looking comments that I am about to make are subject to risk and uncertainties as described at the beginning of this call, and in our periodic SEC filings, and we do not intend to update these comments or forecast prior to our next quarterly conference call. Given our acquisition at Matrix on January 13, I will provide some guidance to help you incorporate the impact of this acquisition on our 2006 numbers. However, in future quarters the Matrix business will not be a recording unit, and we will not segregate it’s results. In addition to the acquisition of Matrix another change for 2006 is the inclusion of stock compensation. I will talk about the gross margin and operating expenses without stock compensation and without charges related to acquisition purchase accounting. I will also give you some estimates of the impact of these new items. Beginning in Q1 2006, we plan to provide the GAAP results and non-GAAP results. The non-GAAP result will exclude stock compensation and charges for amortization of purchase intangibles and in-process R&D. In accordance with SEC regulations we have posted to our website at www.sandisk.com in the investor relations section a summery of the GAAP and non-GAAP guidance comments I’m about to make. In the third and fourth quarters of 2005 we saw average capacities in retail increase in total by only 12%. In order to move the market to give you by capacities and stimulate further growth of new application, we are making significant price moves in Q1. We expect our ASP per megabyte to decline approximately 25% to 30% in the first quarter. With these price moves beginning to stimulate the retail market in the second half of Q1 and with the strength of our mobile OEM business, we expect megabyte sold to range from approximately the same as Q4 to up to 10% above the Q4 level, rather than decline seasonally as with the case in last years Q1. By continuing the ramp of Fab3 throughout 2006, we expect megabyte sold to increase between 180% and 190% in 2006, compared to 166% in the 2005, and 167% in 2004. We except our ASP per megabyte to decline 50% to 55% in 2006, very similar to the 52% in 2005. Our 2006 revenue expectation for our new Matrix business is $60 million to $90 million, the same range we estimated in October. We expect Q1 license and royalty revenue between $78 million and $83 million and full year license and royalty revenue of approximately $350 million representing approximately 45% growth for 2006. This licenses and royalty revenue forecast incorporates the latest data publicly disclosed by our licensee. We expect product gross margin percentage to decline in Q1, due to our price moves being greater than the cost reduction that will be recognized in the first quarter. Generally there is about a quarter lag between when product is build and when the product sells through retail. Therefore the cost of product sold in the first quarter is largely based on our cost structures in the fourth quarter of 2005. As we move in to Q2 and Q3, we expect to recognize cost reduction at a faster rate than the anticipated price declines in both quarters. We expect non-captive mix to be between 30% and 35% for Q1 with the reduction in the non-captive mix to 25% to 30% in subsequent quarters given the increase in Fab3 supply. Excluding stock compensation and purchase intangible amortization, we expect non-GAAP product gross margin for Q1 to be 30% to 32% and for all of 2006 to be 32% to 35%. This compares to 35.5% in 2005, and 31.9% in 2004. On a GAAP basis including stock compensation and purchase intangible amortization both of which are beginning in 2006, we expect product gross margin to be approximately 1 point lower than the outlook ranges I have just provided. We expect non-GAAP operating expenses in Q1 of approximately $125 million excluding the impact of stock compensation intangible and amortization and in-process R&D. The increase in expenses from Q4 to Q1 includes approximately $10 million for Matrix operating expenses. We also planned to increase NAND related R&D spending including spending on 55 nanometer development. And in addition we expect sales and marketing expense to increase sequentially in order to expand international distribution and develop branding campaigns that we believe will be important to our market position and growth in 2006 and beyond. Legal expenses are also forecasted to be higher in Q1 2006 and in Q4 2005. For 2006 we expect non GAAP operating expenses without stock compensation in acquisition related purchase accounting charges to be 17% to 18% of revenue, towards the higher end of our targeted financial model of 15% to18%. Primarily because of the added expenses related to the Matrix business, without the acquisition of Matrix our planned spending would have been near the middle of our target financial model range. Stock compensation is estimated to increase our 2006 operating expenses by approximately $100 million. The Matrix acquisition will result in a Q1 one time charge for in-process R&D and an on going charge for amortization and purchased intangible that will include developed core technology and customer relationship and amortization of deferred compensation. Because the acquisition just closed on January 13th we do not yet have a final evaluation analysis and purchase allocation, however preliminary estimates are that the Q1 one time in-process R&D charge will be between $30 and $50 million and the 2006 intangible amortization is estimated to be between $15 and $25 million spread evenly across the quarter. Excluding stock compensation and acquisition purchase accounting, we expect our non GAAP operating margins to be in the middle to the high end of our target financial model of 20% to 24%. As a result of changes in the mix of our profits around the world, we are forecasting non-GAAP effective tax rate for 2006 of 35% before the impact of stock compensation and acquisition related purchase accounting charges. This compares to our 37% tax rate in 2005 and reflects a true savings in our worldwide tax rate. On a GAAP basis however the tax rate will be higher because the accounting rules do not allow a tax benefit to be taken on the compensation expense related to divesting of qualified incentive stock options nor on the charge for in-process R&D. Our estimated effective tax rate on a GAAP basis for 2006 is 37% however it will be higher than this in the first quarter because in-process R&D is a discreet item that is not tax effective. After the first quarter the GAAP tax rate will be less from the estimated annual 37% but could still vary by quarter, based on the timing of this qualifying disposition of incentive stock options. As you forecast shares for next year remember that we issued approximately 3.7 million shares in the Matrix acquisition and we assumed equity incentives that could result in approximately 0.6 million additional share. We expect to make investments in or loans to Flash Partners in 2006 of approximately $400 to $500 million and we also expect to increase our guarantee of operating leases by atleast the similar amount. We will provide further Fab joint venture investments details at our analyst day in February. We expect internal capital spending unrelated to our Fab joint ventures of approximately 200 million in 2006, primarily related to backend assembly and test in R&D. We expect inventory levels to continue to grow across 2006 due to the continuing ramp in Fab3 and our expected revenue growth. In summery 2005 was in excellent year for Sandisk® and as we look to 2006 we expect our Fab3 investments and our product innovations to generate strong growth in our business. We will now open the call for your questions.

Q - Gurinder Kalra: Thanks. I have a couple of questions, looks like your MP3 players are pretty strong in Q4. Do you know, what seasonality might dictate in terms of their share of the overall, in Q1 and how sort of, share of various applications and products might go from Q4 to Q1? A- Eli Harari: Yes we expect very strong seasonality with MP3 players. So, Q4 for the two players is absolutely is turning to be gorilla quarrel. We expect a significantly lower units and dollar revenues from MP3 players in Q1. Q - Gurinder Kalra: And what you think, it's going to make up that flat in terms of application segments? A- Eli Harari: We have already pointed out that Handsets are very very significant market and we expect that, as well as the fact that we have, now a very larger, really a number of markets as all contribute. The Ultra Product line for example, U3 product line and we are going to launch a number of very sexy products towards the end of Q1 that we showed at the CES Show, the Sansa™ e200 will be launched in March. The new U3 cruisers would be a launching also. There is whole number of products across different markets. So we certainly are not dependent on just MP3 markets to drive our Q1 revenue. Q - Gurinder Kalra: Great, my second question is related to the licensing and royalty side. Can you provide us an update on beating the front as to, what, I guess, events might unfold over the next quarter which could impact your licensing revenue needs either the way or what events might unfold in the next six months? A- Eli Harari: We’ve already pointed out in my prepared remarks that there is tremendous amount of activity going on. In the SD situation there are suits and counter suits and continuations and IPC actions and that is not the only thing. So there is lot of things going on and we are very very aggressively pursuing new entrance that we feel and existing players that we feel should take the license to our pattern. Q - Gurinder Kalra: Thank you.

Q - Jim Cavallo: Hi Good Evening. A couple of core questions. How are you going to gauge, if and when your elasticity is working in the market place. What kind of things you are going to look to, what kind of things can we look to, when should we expect that to see if the price cut is kicking in the kind of elasticity that you would need to soak up the incremental supply, and then I have a couple of follow up. Thanks. A- Eli Harari: The main metric for that would be the Megabyte per unit, that we ship in retail, that’s the first place, when people start moving their preference from 512 Megabyte to Gigabyte. We are now – to achieve 600055 Megabyte per retail, average Megabyte per unit that means you are closer to the 512 Megabyte to the Gigabyte. As the cost of the Gigabyte cards comes down quite significantly, we do expect that people will start switching that and that will be first place to where you will see that. But it is not so much, the first reaction is not so much, increase in units because that requires new applications that increase Megabytes per unit. Q - Jim Cavallo: Great, first follow-up with the, on inventory, what do you expect inventory to do in calendar Q1? A - Judy Bruner: We would expect inventory to continue to grow in Q1 given continued steep ramp for Fab3 across the first quarter. Q - Jim Cavallo: Okay and then my final question, I understand that demand drivers, we all do about how great the demand drivers are for NAND flash. Do you worried all about how many of the DRAM companies seem to be start moving, seem to be moving incremental capacity from DRAM over to NAND and obviously at some price. NAND can observe all this incremental supply, did you worry about the impact that is going to have on pricing as you move throughout the year if the DRAM companies continue to be so aggressive in that migration, that’s it from me, thanks. A- Eli Harari: Yeah, this is complex answer ofcourse, and I am sure you know it, but basically it is really, two aspects of that. Definitely we are worried about our new suppliers getting new capacity switch from DRAM to NAND flash. That part of the second aspect which is that, the output that you get from the 300 mm 70 nanometer MLC wafer is so dramatically greater. Then what do you do from switching from 90 nanometer DRAM wafer to 90 nanometer Binary NAND or even 70 nanometer Binary NAND on 200 mm wafer. Most of the DRAM capacity today in the world is 8 inch. And the conversion of 8 inch DRAM wafers to NAND at 90 nanometer is not going to see a bit significant crunching in terms of, the contributor over the numbers, total numbers of Megabytes added for the industry, really very very substantial. In other words, we are getting to very large numbers now. And we think that DRAM conversion, that’s was the easy task DRAM guys, is going to become spend swing and basically at that point we move to 300 mm and leading edge NAND MLC. Q - Jim Cavallo: Thank you very much A- Eli Harari: Thank you.

And our next question will come from Mark Edelstone with Morgan & Stanley. Q - Mark Edelstone: Hi Good Afternoon guys. Thanks for the data, I had one question, you have might got it but Judy had missed it, what was the contribution from MP3 players in the fourth quarter? A - Judy Bruner: We didn’t provide for the fourth quarter. We provided it for the year and I said that the revenue from Digital Audio Players moved from 6% of our revenue in 2004 to 13% for 2005. A- Eli Harari: And we did say that revenues in Q4 quadrupled, Modem quadrupled the revenues from MP3 players in the prior quarter which was very very steep increase. I think, it is definitely was one of our better players. No comment on that. And as far as your comment about all of this information that Judy due to provide, I do not, I would not wish with you guys, I would not want wish to be a financial analyst, with all these GAAP and Non-GAAP-. Q - Mark Edelstone: Just multiply it by about 30 more companies? A- Eli Harari: Yeah that’s what, I can just imagine this is unbelievable, anyway, that is what we got to do. Q - Mark Edelstone: Okay, thanks for the clarification there. I guess, my question is, Eli, is looking at the Sansa™ players that you brought out, showed at CES certainly seems like those are going to be well received in the market. So, what if you kind of give us your views as to what you think the potential there could be when you look at the fourth quarter of this year and I got a couple of quick follow-up. A - Eli Harari: Yes, so session that we had for the e200 Sansa™ has been universally very very positive and we are very excited about it. But our strategy, as we said, in MP3 players is to basically offer good, better and best. The e200 is best and we will serve very very well in that part of the market for customers that want and high end, high quality products but also want an open, way to get the content through subscription services from Napster, Real Networks, home music and so on. But we are also pretty much focused on the midst to low density MP3 players under 4995 to the 1995 for instance. We think that is going to be, where we can move a lot of Megabytes and the lot of units during the year. However the e200 is a very exciting product for sure. And again in long end, we do think that Handsets would be the primary comrade for distribution of music. Just by the shear numbers, we are talking 11 million cards in the fourth quarter compared to, this is very very large number, compared to all iPods 14 million iPods sold in the quarter, you see that we are and we haven’t really touched the surface with handsets. Q - Mark Edelstone: Okay, thanks. Judy, an accounting question. I just want to make sure my understanding is correct here, with the price reductions that you are taking and with 7 to 8 weeks of channel inventories. It seems like that should line up every things goes according to your plan that you should be able to end the quarter without having a take any type of charges for price protection, is that correct? A - Judy Bruner: Well remember that because we recognize revenue in the retail channel based sell through, at the time we recognize the revenue we know what price the product is being sold to the consumer at. So the pricing and the impact of the price protection lines up with sell through. And if you look at our balance sheet at the end of the fourth quarter there is a line for deffered income from sales to the retail channel, that number includes our estimated impact of the price protection which we accrued the end of the fourth quarter for all of the known price moves across all the geographies in the first quarter. Q - Mark Edelstone: Okay, is that the major factor as to why it is down quarter-to-quarter then? A - Judy Bruner: Yeah. Q - Mark Edelstone: Okay, then just last question, Eli, can you just walk us through what the current Fab3 ramp plan looks like as you go to 2006? A- Eli Harari: We were certainly ahead of our plan in the fourth quarter, the ramp in the fourth quarter was substantially faster than we had guided you or that we thought was possible, it is really tremendously strong execution and we are definitely on schedule to meet the guidance that we gave you that by the end of Q1 we will be at 30,000 wafer hours and we’re certainly not come on top of that point. We will try to provide some more guidance on that at the Analysts Conference but in general this Fab is performing extremely well and we’re pleased with the cost structure as the number of wafers increases at a very fast pace the fixed cost does not increase at the same pace and as now cost are coming down at a very fast pace. As we expect, basically through the rest of the year continuing through the cost reduction that would be quite significant every quarter aid through increasing the volume, amortizing the cost, fixed cost over greater volume leads to the yield improvement and sees through the transition to 70 nanometer MLC. Q - Mark Edelstone: What where the output for Q4 Eli? A- Eli Harari: We’ve not broken that, but the contributor to the inventory as, the high inventory at the end of Q4 is because this is very rapid ramp every week basically and increase in the output. Q - Mark Edelstone: Great. Thanks a lot guys. Judy Bruner, Executive Vice-President of Administration & CFO: Okay, if we could limit the questions to one or two for each of the analysts that would be great that way we could answer everybody else, thanks so much.

And our next questions will come from Daniel Gelbtuch with CIBC World Markets. Q - Daniel Gelbtuch: Hey guys! Congratulations. I was wondering if you guys have seen Samsungs (indiscernible) clearly do you think there some of efforts with MLC, have you seen any product in the market and also what do you expect to see on the pricing for your non-captive sourcing. Are you expecting to see similar price reductions over the course of the quarter? A- Eli Harari: We are shipping some of the MLC in some of our products, and we’ve said all along that we want to be one of the primary customers NAND/MLC because, like to pages called. But it is well known that they have been and in fact their own on numbers indicate that there have been somewhat ramping after the MLC had lower pace than projected from the beginning of 2005. As far as price reduction non-captive, I argue upon and absolutely, I mean they have, we fully expect overtime competition will match our pricing, but this move is primarily to really stimulate new demand also suffice that, the new capacity coming on board does not become excess capacity. Q - Daniel Gelbtuch: Okay and just switching gears one second to U3, can you comment and what your expectations are for your volumes, your percentage of volumes for USB drives how will be U3, how much will not by the end of the year. A - Eli Harari: We expect majority if not all of our Cruiser USB flash drives to the U3 enabled for the rest of year, definitely we are moving in the right direction in both parts of the NAND systems. I think I am pretty confident about the direction we are taking, very, very pleased about U3. Q - Daniel Gelbtuch: Thank you very much. A - Eli Harari: Thank you Daniel.

We’ll now go to Eric Gomberg, Thomas Weisel Partners Q - -Eric Gomberg: Congratulations on the strong 2005. A - Eli Harari: Thank you. Q - -Eric Gomberg: Obviously you had some additional momentum on the wireless side, I was wondering if you could discuss a little about the visibility there, what type of bundling and after market growth you’d expect to be and I have a follow-up. A - Eli Harari: Oh. We have the great deal of visibility on the handset, you are talking about the handset. Right okay some people when they say wireless they mean WiFi. We are working with all major handset makers and we are very, very pleased with the adoption of MicroSD and Memory Stick™ for Dual, the demand in the fourth quarter, we could have shipped more, frankly we could sold significantly more than 11 million units and we were frankly constrained backend capacity of assembly, and by the way that now is behind us. We do have ample backend assembly and test capacity to meet the demand and the demand is kind of Bimodal, the low capacity 64 megabyte for general purpose maybe the camera phones and the 512 megabyte primarily for the MP3 phones. Q - Eric Gomberg: Okay, just have a question also now on margins, a quick one for Judy, as far as the past, should we expect faster growth of R&D or SG&A. The question is also on gross margins for the year, you said I think 32 to 35 on product gross margin. Just wondering you said more captive than external last year that you should be able to cost reduce faster then your own ASP declines. So wondering why product gross margins would be down from 35.5 of 2005. A - Judy Bruner: Okay so let me take that one first and then I’ll go back to your question about G&A versus R&D. So really the overall gross margin for the year is impacted by our forecast for a sequential decline from Q4 to Q1 but then we expect as I said the cost reduction that we will enjoy in the middle part of the year could be at a faster rate then the so subsequent price declines and subsequent quarters. So we work our way back up but leading to an average overall range of 32% to 35%. Which you know if were at the high end could be very close to 2005, and even at the lower end is better than my experienced in 2004. But also keep in mind the mix of the products and as our mp3 players are becoming a bigger mix of our overall revenue, as I indicated those two carriers somewhat lower gross margin percentage eventhough they are contributing significant gross margin dollars given the higher non memory components within the build-up material mix. And as to your first question you asked whether R&D would grow which will grow faster R&D or G&A and generally I would say R&D in particular given the R&D team that we have picked up now for Matrix as well as our investments in 55 nanometer and 45 nanometer throughout 2006. Q - Eric Gomberg: Okay Thank you.

And our next question come Satya Chillara with American Technology Research Q - Satya Chillara: Yeah! Hi guys. I know you would talk about greater visibility into cellphones can you talk about well before that Judy said 13% of the revenues come from handset in 2005. Can you give us some sort of insight into what would that be by the end of 2006 whatever that revenue might be? A - Eli Harari: We will try to provide more information at the Analyst Conference at February 23rd but certainly we expect it to be on the rapid growth path and it will certainly higher than 13%. I mean I’d be surprised if it is lower than that. Q - Satya Chillara: Okay in terms or maybe can you answer the question which regions are you seeing the MP3 phones really taking up based on the OEM activity that you’re seeing, where do you get all this demand coming from? A - Eli Harari: We had been shipping really only to the US in any substantial number of MP3 players. Almost exclusively through really two of our main retail customers, so the room for expansion is very, very substantial opportunity to leverage our channels through other chains as well as geographically outside of the United States. We believe a very substantial and primarily so at a low and mid end price range not at the high end. Q.-.Satya Chillara: Okay. One last question for Judy. Judy what is the plan for captive to non-captive in 2006 with the 300 mm expansion and so on. Are there is any changes in the plan in terms of captive to non-captive mix. A - Judy Bruner: I had indicated in my prepared remarks that we expect 30% to 35% in the first quarter and then to move into the 25% to 30% range in subsequent quarters. Q - Satya Chillara: So based on that margin should improve right? So why are you still conservative in terms of 32 to 35 kind of gross margin. A - Judy Bruner: Well as I indicated a while ago, mix is an impact and we of course will see how things roll out over the course of the year. Q - Satya Chillara: Okay, this model really does give us the tremendous possibility that we’ve always said a very, very importantly 2005 was clearly was supply constraint with captive and we market out really on non-captive in 2006 the situation maybe a flipped and that is the beauty of our model. Q - Satya Chillara: Okay, thank you.

And we will go now to Craig Ellis of Citigroup. Q - Craig Ellis: Yeah! Thanks and congratulation on the reduction ramp on the fourth quarter. A - Eli Harari: Thank you. Q - Craig Ellis: Some clarification on the inventory for the fourth quarter did the backend in terms of any tightness bearing on the inventory dollars between the backend assembly. A - Judy Bruner: No not really as Eli indicated a minute ago by the end of the fourth quarter we really did not have any backend assembly or test bottlenecks. We cleared those issues. Q - Craig Ellis: Okay, then Eli back in October you talked about 50% price for Megabit declined, right now maybe a little bit have you added 50% to 55%. If you think about how you could manage that both strategically and tactically. If you got a supply you could press that pick up share by increasing price not only in the first or the second quarter. Can you show your thinking about how you might use that price for Megabit declined?. A - Eli Harari: Well, the most important thing for us is to focus on our cost reduction to make sure that, we reduce our cost faster and we would reduce our megabyte. Secondly, there is no point leaving money on the table and driving pricing faster than we can actually supply the market. So, we will, you could also frankly, view the strategy of basically linear price reduction throughout the year, it’s a kind of like, the most demanding environment but, it’s really, is not as effective in our experience in generating stimulation, simulative effect. So, we will definitely use our cost advantage to drive the demand to our benefit, to our advantage, to make sure that 100% of our output, captive output is very sound world wide. Q - Craig Ellis: Okay. That sounds like, something that looks more like 2004 than gradual price declines? A - Eli Harari: No, we’ll take it one quarter at a time, we’ll see how it goes. Q - Craig Ellis: Okay, all right, and then lastly, any update on what you are seeing with regards to iNAND™ in design and switch backlog. A - Eli Harari: iNAND™ we announced September, it is about 3 ½ months ago, we are seeing initially a good response, we expected be a winner in Handset, it has not just very very easy designing and very attractive cost structure but also the security cost/security, but it will be most in the second half of the year in terms of our volume reduction and it will be a relatively small contributor still in 2006. Q - Craig Ellis: Okay, Judy, one more, I think, I heard you say, bit growth of a 180% to 190%, is that correct? A – Judy Bruner: Correct. Q - Craig Ellis: And that assumes the 25% to 30% non-captive resourcing? A – Judy Bruner: Correct. Q - Craig Ellis: Okay.

Our next question from Sam Doctor with J.P.Morgan. Q - Sam Doctor: Thank you. A couple of good questions for you. Mostly of the questions have been answered but you have an update on the pre packaged media on SC cards? A - Eli Harari: I am sorry, under what? Q - Sam Doctor: Prepackage media grew by cards and do you think the distribution of content? A - Eli Harari: Okay, it’s a groupwise. The concept again, great concept and has been a tremendous door opener for us, promoting the record labels, that component owners, and by distance again, it’s a long term market development evangelizing and this is a very very good start. So, we are very very pleased with that. Q - Sam Doctor: Okay. And on the Matrix acquisition, what was the kind of applications do you expect to see in 2006 what is driving revenue for this year? A - Eli Harari: 2006 the revenues are really driven by growing their business which is preprogrammed cards primarily for video game application, software distribution, games and music and the key for us is to get them on accelerated technology roadmap and develop a much broader customer base in the application to technology, the archival technology is very, very interesting you know frankly very exciting, and we will talk some more about that again on February 23rd. Q - Sam Doctor: Ok great thank you. A - Eli Harari: Thank you. Judy Bruner, Executive Vice-President of Administration & CFO: Looks like we might have more time for two more callers, thank you.

Our next question comes from Vijay Rakesh with Oppenheimer Q - Vijay Rakesh: Yeah, I was just wondering when you look out at the Q1, so you are looking at about flat to about up 10% bit growth, what the price as you mentioned is that across, is that blended ASPs or? A - Judy Bruner: Yes for blended decline in ASP per megabyte of 25% to 30 %. Q - Vijay Rakesh: Okay, and can you characterize what the MLC output was in the quarter. And what do you expect that in the quarter? A - Eli Harari: MLC on 70 nanometer is 100% MLC we don’t make any Binary on 90 nanometer, its mostly MLC, over 90 % of MLC. Q - Vijay Rakesh: And your 8 Gig, what percentage was it Q4 and where do you see Q1? A - Eli Harari: On the 70 nanometer, all of Q4 opt for 8 gigabit, but we are now rolling out the chat version, the 40 gigabit lower than -? Q- Vijay Rakesh: Okay great. Thanks A - Eli Harari: Thank you.

And our final question today will come from Doug Rudisch with Brookside Capital. Q – Doug Rudisch: Hi just a question on MicroSD the cell phone cards, just can you review sort of the price premium you’ve been able to extract on that form factor, if any and if you’ll be able to hold it over time. A - Eli Harari: No we are not extracting any premium from MicroSD we are selling it in the same priced OEMs as we do a MiniSD or SD for that matter, we are developing the markets, we’re not trying to extract a premium, our cost on the MicroSD is, I believe about the same to MiniSD. We don’t want to use pricing to get customers to decide MicroSD is ideal for all the new generation of ultra slim handsets that’s really the only way, frankly that they can get a decent sized card in a very very small form factor if you take the connecter into consideration. Q - Doug Rudisch: And your market share there’s wide and how you expect that to evolve over the course of the year? A - Eli Harari: We have made MicroSD an industry standard, we want other people to supply it, we would like to have the lion share of the supply but we think its very important that there are other supplies, we expect to collect royalties, substantial royalties as MicroSD become very popular and the other suppliers that take license from the SD association we share in the royalty that’s generated from that. Q - Doug Rudisch: Any analytic view of where your market shares now and where you will think it will go over the course of the year? A - Eli Harari: I am sorry, say it again Q - Doug Rudisch: Any quantitative view of where you your market share is now in that form factor and where it will go in the course of the year? A - Eli Harari: MicroSD to the extent we have very, very high market share in the, I don’t know if its 80% or - but it is somewhere along there we don’t expect to keep that for long time and we have probably have lost some market share because of our inability in the fourth quarter to meet our customers demand and you know, we would like to be the majority supplier of MicroSD going forward. Q - Doug Rudisch: Thank you very much. A - Eli Harari: Thank you, So I would like to thank you for attending SanDisk® today we are excited about the opportunities ahead of us and look forward to meeting many of you during our up coming Analyst Day February 23rd,thank you very much.