M-Systems Profits, Sales Soar in Q3

DiskOnKey developer attributes strong quarter to growth in all its markets.

Omri Cohen
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Omri Cohen

Investors did not have to wait for M-Systems' third-quarter results before recognizing the DiskOnKey manufacturer's potential. In the past four months, M-Systems' share price has soared by 75 percent, bringing the company value to $1.2 billion.

The Kfar Sava-based company yesterday reported that third-quarter results exceeded even the most optimistic of forecasts. Revenues jumped 55 percent year-on-year to $132.6 million, while net profits more than doubled to $13.9 million.

The company attributed its strong performance to growth in all its markets.

"During the quarter we took steps to further solidify our foundation for long-term growth," company president and CEO Dov Moran said. "Our agreement with Hynix is expected to provide us with improved purchasing terms, and will broaden our component supply options. As part of our expanded relationship, we are also developing a DiskOnChip embedded flash drive (EFD) for the mobile market with Hynix. Adding Hynix as an additional source for our DiskOnChip EFD will better enable us to meet the demand of handset vendors for secure, reliable, high density embedded storage in the fast-growing multimedia handset market.

"In addition to Hynix, we are in talks with other flash vendors, and continue to explore opportunities to expand our supply sources and cooperate with these vendors to bring new products and technologies to our different target markets," he said.

M-Systems markets innovative flash data storage solutions for the digital consumer electronics markets, primarily targeting two fast-growing markets: the USB (universal serial bus) flash drive market with its DiskOnKey, and the multimedia mobile handset market with its Mobile DiskOnChip.

Given these growing markets, M-Systems upped its guidance for the year. The company expects to end the year with at least 40 percent sales growth to $490 million, while net profits are expected to leap by 87 percent to $45 million, or $1.08 a share.

Investors appeared unimpressed, and M-Systems' shares fell almost 2 percent in late-morning trade on Nasdaq yesterday.



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