SanDisk Corp Chief Executive Eli Harari said 2009 could turn out to be significantly better than anticipated at the start of the year as big cutbacks in flash memory production bring balance back to an industry stung by oversupply.

Shares of SanDisk rose after Harari said prices for flash memory have doubled over the past four months to more than $2 per gigabyte as producers have cut back substantially on capacity.

After the shock of the fourth quarter, our balance sheet is much better, Harari told the Reuters Global Technology Summit in New York on Tuesday. This year could turn out to be significantly better than what we thought at the beginning of the year.

SanDisk, whose rivals include Micron Technology Inc, Samsung Electronics Co Ltd, and Hynix Semiconductor, noted that a recent sale of operations to Toshiba bolstered cash to fuel operations. SanDisk has also substantially cut operating expenses, leaving the company in solid shape.

I feel the company is headed in the right direction, said Harari, a physicist and co-founder of the company, who admits he doesn't like gadgets. I feel as good now as I've felt at any time in the last three or four years.

As a result, the CEO said SanDisk has no immediate need to issue new shares to raise capital, a plan it had suggested in February that could diluted its stock 12 percent to 20 percent.

But the plan has not been completely discarded.

In January, we didn't know if we were going into a 2009-2010 winter, if you will. In that case you want to make sure that you are well capitalized, he said. The situation now is much, much better. The pressure for financing is definitely subsided.

At this stage there is no plan, he added. But I'm not saying that it's off the table.

SanDisk is the No. 1 maker of flash memory cards used in digital cameras and other electronic devices, and 60 percent of the company's business is in retail.

With consumers and corporations alike still spending carefully, many tech executives have said that visibility is tough for the rest of the year.

Harari said he was cautiously optimistic and that consumer demand has been stronger than expected.

In the consumer space, demand has been remarkably solid, (although) I wouldn't say stellar, he said.

Harari called mobile phones the main engine for growth and potentially the biggest future vehicle for flash memory.

NEGOTIATIONS WITH SAMSUNG

Harari characterized SanDisk's negotiations with Samsung, to renew their patent licensing agreement, as quite intense. Their current, seven-year agreement is set to expire on August 14. He said both sides would prefer to come to a negotiated agreement by that day.

Both parties are serious and sincere to try to come up with a resolution that is acceptable to both sides, Harari said.

If there is no agreement, SanDisk plans to move to Plan B, he said, without disclosing what that might be.

But he indicated the possibility of litigation if an agreement is not reached, as Samsung and its customers would then be infringing patents that SanDisk holds.

A spokesman for Samsung, which pays about $350 million a year in royalties to SanDisk to use its patented flash memory technology, declined to comment on the negotiations.

SanDisk shares were off 0.81 percent at $14.61 in afternoon trade on the Nasdaq, down from a session high of $15.09.

(Reporting by Franklin Paul, Gabriel Madway and Anupreeta Das; Editing by John Wallace and Steve Orlofsky)

Electronics