SanDisk Corp reported a higher-than-expected profit on strong demand for mobile devices, but shares of the flash memory supplier fell 3 percent as margins disappointed investors.

SanDisk's shares have surged 70 percent over the past year as the company and its rivals have benefited from tight supply and price stability in the flash market.

NAND flash is a commodity, and SanDisk's fortunes are in large part determined by the supply-demand balance in the global market and its impact on pricing. [ID:nN2797320]

Caris & Co analyst Craig Ellis said pricing declines in the fourth quarter were steeper than expected, causing SanDisk margins to fall short of expectations.

SanDisk's adjusted gross margin came in at 43.7 percent, versus Wall Street's estimate of 45.2 percent.

The company on Thursday reported net income for the fourth quarter, ended January 2, of $485.5 million, or $2.01 a share, up from $339.5 million, or $1.45 cents a share, in the year-ago period.

Excluding items, SanDisk earned $1.27 a share, above the average Wall Street estimate of $1.09 a share, according to Thomson Reuters I/B/E/S.

Revenue rose 7 percent to $1.33 billion, versus Wall Street's estimate of $1.31 billion.

Chief Financial Officer Judy Bruner said in an interview that the quarter was driven by strong retail demand in Asia.

Bruner said: We feel good about the supply-demand balance for 2011, our expectation is that the industry will be in balance.

SanDisk is the No. 1 supplier of flash memory cards sold to consumers at retail. But two-thirds of the company's sales now come from manufacturers that embed flash in their devices.

Shares of Milpitas, California-based SanDisk closed at $51.32 on the Nasdaq and fell 3.1 percent to $49.73 in after-hours trading.

(Reporting by Gabriel Madway; Editing by Steve Orlofsky)