SanDisk's Video Salvo

The maker of the Sansa, a distant No. 2 to the iPod, has a new way to view downloaded content on a TV. It could turn up the heat on Apple

by Arik Hesseldahl

In the average consumer's home there is a gaping digital chasm between the personal computer and the television set. There are actually many ways to watch downloaded programs and movies on the living room TV—typically they involve the transfer of video files over a home network from a computer to some gadget connected to the TV. But few of them are easy.

Just ask the scores of companies—from Microsoft (MSFT), Apple (AAPL), and Cisco (CSCO) to Netgear (NTGR), Amazon (AMZN), and Netflix (NFLX)—that have tried mostly in vain to bridge that gap.

Memory chipmaker SanDisk (SNDK) hopes to take at least part of the pain out of the equation. On Oct. 22, SanDisk will introduce TakeTV, a large flash-memory drive that, once loaded with movies or TV shows from a PC or Mac, connects to a cradle that in turn connects to a TV. A 4-gigabyte version will sell for $99, the 8-GB model for $149.

Relying on Its Own Factories

Alongside the TakeTV hardware, SanDisk is launching a test version of an Internet video download service called Fanfare. SanDisk's main media partner for the launch is CBS (CBS), which will offer shows like Survivor, CSI: Miami, and some shows from Showtime, including Brotherhood, Dexter, and Fat Actress, for download. Another partner is Jaman.com, the upstart international movie download service (BusinessWeek.com, 2/2/07).

It's a bold move for SanDisk. Best known for its flash-memory cards used in digital cameras, SanDisk has in recent years emerged as the only company with a digital music player that can hold its own against Apple's iPod powerhouse. In part, that's because by relying on its own flash-memory factories, SanDisk can supply one of the most expensive and critical MP3-player components at cost.

In the U.S., SanDisk's Sansa line of players holds a healthy, if distant, second place behind the iPod (BusinessWeek.com, 5/8/06). The most recent figures from market research firm iSuppli peg SanDisk's global sales at 1.8 million units worldwide in the first two quarters of the year, or a little more than 9% of the 20.3 million iPods Apple sold in the same period. The NPD Group reckons that SanDisk sells about 10% of the digital music players in the U.S.

Despite its successes, results at SanDisk have been mixed. On Oct. 18. the Milpitas (Calif.)-based company reported revenue of $1.04 billion, up 38% over the year-ago quarter, but profits were down to $84 million, or 36¢ a share, compared to 51¢ a share in the year-ago period. Investors spanked the stock the next day, erasing more than 15% of its value on warnings that memory prices would fall as retailers lowered prices in preparation for the fourth-quarter holiday season. The company's results were also dragged down by charges related to its acquisition of M-Systems, an Israeli memory chipmaker.

Apple Vulnerable in the Content Arena

SanDisk could steal a bigger march on Apple in the area of video. True, Apple says it has sold 100 million TV shows and 2 million movies through its iTunes Store. And playing video has become a flagship feature on no fewer than four members of Apple's iPod lineup.