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    Lexar Media, Inc.

47300 Bayside Parkway

Fremont, CA 94538

    t 510.413.1200

f: 510.440.3499

July 11, 2005

VIA EDGAR AND HAND DELIVERY

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, D.C. 20549

Attention: Julie Sherman

 Division of Corporation Finance

Re: Lexar Media, Inc.

Form 10-K for the fiscal year ended December 31, 2004

Filed March 31, 2005

File No. 000-31103

Dear Ms. Sherman:

     On behalf of Lexar Media, Inc. (“Lexar” or the “Company”), in this letter, we respond to the
comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”)
contained in the Staff’s letter dated June 10, 2005. The numbered paragraphs below correspond to
the numbered comments in that letter; the Staff’s comments are presented in italics. In addition,
in an envelope marked “FOIA Confidential Treatment Request,” we are supplementally submitting, with
the copy of this letter being transmitted via hand delivery, a copy of the Appendices to this
letter regarding which the Company is requesting confidentiality pursuant to Regulation 200.83 of
the Rules of Practice of the Commission (17 C.F.R. §200.83).

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies and Estimates

Valuation of Inventory, page 25

    1.

    Based on the fact that you determined that you did not maintain effective internal control
over the accounting for inventory valuation reserves because your procedures did not
previously identify all excess and slow-moving products we believe your disclosures should be
enhanced to discuss your accounting policy in more detail, especially those procedures which
have recently been put into place to ensure more timely and accurate judgments and estimates
can be made by management. Revise in future filings.

The Company supplementally advises the Staff that, in future filings, the critical accounting
policies will include disclosures that: (1) the Company performs a quarterly detailed analysis of
its inventory to identify all excess and slow moving products to be written off based on current
forecasts, which takes into account the Company’s knowledge and expectations of industry and
product developments; and (2) the Company estimates any write-downs to inventory to reduce its

carrying value to its lower of cost or market value based on current and expected selling prices
over the period that the related inventory is expected to be sold. Inventory write downs are
recorded as cost of revenues. At the time the Company recognizes this charge, a new cost basis for
that inventory is established and subsequent changes in facts and circumstances will not result in
the restoration or increase in that newly established cost basis. If this inventory is subsequently
sold or otherwise disposed of, the reduced cost basis is matched to the movement of related product
inventory.

Results of Operations

Cost of Product Revenues, page 29

    2.

    Please tell us more about the events and circumstances that resulted in the inventory
impairment charges in 2004. Specifically describe the following: (i) the nature of the
inventory written-down or off; (ii) how the write-downs were distributed between raw material,
work-in-process and finished goods; (iii) how you determine the amounts and timing of these
write-downs; (iv) if all the items are completely written-off, tell us when they were
discarded or when and how will they be disposed of; and (v) for any items retained, what
consideration have you given to the fact that subsequent sales of these items could materially
impact future gross profits margins.

The Company supplementally advises the Staff that the events and circumstances that resulted in the
inventory impairment charges in 2004 were as follows:

(i) As discussed in the response to comment #5 below, during the fourth quarter of 2004 and
the first quarter of 2005, the Company experienced dramatic selling price declines as a
result of unexpected changes in the market-place across most of its product lines. These
declines in selling price required the Company to make adjustments to write-down inventories
to their lower of cost or market value as of December 31, 2004; and

(ii) There were significant unexpected changes in demand for certain products that were
partially the result of changes in selling prices of related products and resulted in excess
inventory write-downs. The substantial majority of the inventory write-down recorded in 2004
was the result of dramatic and unexpected selling price reductions in the first quarter of
2005 for two specific “form factors” among the flash memory products sold by Lexar: Memory
Stick Pro and xD Picture Card.

With respect to the specific information requested by the Staff in clauses (i) through (v) above,
the Company supplementally advises the Staff of the following:

(i) Please refer to the table in Appendix #1 for a classification and quantification
of the inventory written-down or off.

(ii) Please refer to the table in Appendix #1 for a distribution of the write-downs
between raw material, work-in-process and finished goods.

(iii) The Company’s current procedures to determine the timing and amounts of these
write-downs was discussed in response to comment #1 above. The Company determines excess and
slow moving inventory based upon current forecasts of selling prices, adjusted for
realization costs and taking into account the period expected to sell the inventory. The
analysis is performed by stock keeping unit or “SKU.”

(iv) Sales of previously written down inventories during 2004 were not material and amounted
to the sale of $587,000 of inventory which had been previously written off. In addition,
$590,000 of inventory which had been previously reserved was scrapped. These dispositions
during 2004 took place as follows: Q1 - $494,000; Q2 - $239,000; Q3 - $83,000 and Q4 –
$361,000. Inventory on hand at December 31, 2004 which has been written-off or written-down
is being regularly evaluated by the Company in order to determine whether it will be sold or
scrapped and, if so, the timing thereof.

(v) The Company does not anticipate a material impact on future gross profit margins upon
subsequent disposition of inventory items that have been written-down or off and were still
on hand at December 31, 2004. In determining inventory write-downs, the Company makes
estimates to write-down its inventory to its net realizable value; accordingly, the only
expected impact to gross margin upon disposition would relate to selling such inventory at
carrying costs. In the past, volumes of such sales have not been material and did not have a
material impact on its gross margins. In the event that such sales are anticipated to have a
material impact on its gross margins, the Company will discuss the anticipated impact in
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”). Similarly, in the event that previously written down inventory is sold, any
material impact to the gross margins will be discussed in the MD&A.

Note 2 – Summary of Significant Accounting Policies

Segments, page 71

    3.

    We note that you have three categories of products. Revise future filings to report revenues
for each product or each group of similar products. See paragraph 37 of SFAS 131.

The Company supplementally advises the Staff that its primary product is digital media based on
flash memory. Controllers may be sold separately from the digital media, but they are primarily
sold as a component of the Company’s flash based digital media devices. Connectivity products
(which connect the digital media to a PC or other hardware device) are sold primarily as an
accessory to round out the Company’s digital media offerings and are ancillary to the sale of the
Company’s digital media. Accordingly, management considers digital media products, connectivity
products and controllers to be a group of similar products as referred to in paragraph 37 of SFAS
131. In addition, revenues from these products were not material as the Company’s controller sales
represented approximately 1%, 2% and 2% of its gross product revenues during 2004, 2003 and 2002,
respectively, and as revenues from the sales of connectivity products represented approximately 1%,
2% and 5% of its gross product revenues during 2004, 2003 and 2002, respectively.

Revenue Recognition, page 72

    4.

    Your revenue recognition policy states that you “generally recognize product revenue upon
delivery when persuasive evidence of an arrangement exists. . .” If revenue has been
recognized prior to delivery please tell us the circumstances for such revenue
recognition and the basis for the accounting treatment. Otherwise, clarify the notes in
future filings to specifically state that revenue has not been recognized prior to delivery.

The Company advises the Staff that revenue has not been recognized prior to delivery. In future
filings, the Company will revise this revenue recognition disclosure related to OEMs and end users
to delete the word “generally” as follows: “With respect to OEMs and end users, we recognize
product revenue upon delivery provided that persuasive evidence of an arrangement exists....”

    5.

    We note that starting in the fourth quarter of 2004, you determined that you were no longer
able to reasonably estimate the level of revenue allowances and product returns and therefore
you now defer revenue and costs of revenues for all your retail customers until they can sell
the product to their end-customer or a time period that is “reasonably estimated” to allow the
retail customer to sell their product to the end-customer has elapsed. Please address the
following:

    •

    Explain specifically what triggered your inability to reasonably estimate returns and
incentives as of October 1, 2004 for your retail customers.

In October 2004, during the financial close process relating to the third quarter results, the
Company made estimates concerning price protection obligations that it expected to incur on its
customers’ channel inventory during the fourth quarter of 2004. These estimates were based, as they
had been historically, on price moves that were then planned or anticipated during the period
during which the Company determined the channel inventory to sell through to end customers. This
rate of product sell through was primarily determined based on inventory reports from the Company’s
customers.

Throughout the fourth quarter of 2004, the Company tracked its price protection obligations
according to its past procedures. This process had previously been reliable in
estimating price protection obligations (please refer to the table in Appendix #2) but
failed during the fourth quarter of 2004 as the Company agreed to unanticipated demands for price
declines from its customers. The Company believes the unexpected price pressure was the result of
new developments as follows:

(i) Significant unexpected competition from SanDisk and others resulting in price wars that
triggered steep declines in selling prices. In the fourth quarter of 2004, average selling
prices per megabyte of the Company’s digital media decreased approximately 45% (taking into
account both selling price declines and changes in product mix) as compared to the Company’s
original estimate of approximately 27%. The Company believes that SanDisk sought to
aggressively regain market share from Lexar and others by dropping its selling prices. In
addition, increased competition in the digital media markets from companies like PNY,
Kingston and M-Systems contributed to significantly higher uncertainties about future
pricing.

(ii) Commoditization of digital media products. With products now being sold extensively in
retail outlets such as WalMart, BestBuy and Target, the consumer is not discerning of Lexar
quality versus others, particularly value line products. This trend of commoditization
accelerates when selling prices experience steep declines, such as during the fourth quarter
of 2004. New price conscious customers can now afford the product and those customers
typically do not research and compare the performance and reputation of the products.

(iii) Absence of flash memory chip supply constraints from suppliers (Samsung, Toshiba and
others), particularly at lower flash densities, which drove down flash memory chip prices. In
addition, Samsung and Toshiba/SanDisk lowered prices of higher density flash chips to move
the market up to higher capacity products and be more competitive on a cost per bit basis
than the newer flash memory suppliers who recently entered the market (Renesas, Hynix and
Micron). The move to higher capacity cards resulted in faster than anticipated selling price declines in order to move products in the retail marketplace (e.g. the retail selling price per bit of a 128MB flash
memory device was $0.154 while the retail selling price per bit of a 1GB flash memory device
was $0.073 — or half the cost per bit of storage at the end of 2004).

    •

    Demonstrate your ability to make reasonable estimates of revenue allowances and product
returns prior to such dates. Specifically, how you met the requirements in paragraph 6 of
SFAS 48 for prior years. Provide quantified evidence on a quarterly basis where necessary
to support your conclusion.

The Company supplementally advises the Staff that it has considered the six criteria listed in
paragraph 6 of SFAS 48 for recognizing revenue when rights of return (including price protection)
exist as follows:

(a) The seller’s price to the buyer is substantially fixed or determinable at the date of
sale.

The selling price is agreed with customers prior to shipment of the product. The
Company grants rights of returns, including price protection, and closely monitors
returns and price protection on a quarterly basis. Prior to the fourth quarter of 2004,
the Company had a historic and demonstrated ability to determine the selling price by
making reasonable estimates of returns and price protection for customers that met the
criteria for revenue recognition upon shipment.

(b) The buyer has paid the seller, or the buyer is obligated to pay the seller and obligation
is not contingent on resale of product.

The Company invoices its customers, including distributors, upon shipment of its
product and payment is due on its invoices in accordance with normal invoice payment
terms. The obligation is not contingent on resale of the product.

(c) The buyer’s obligation to the seller would not be changed in the event of theft or
physical destruction or damage of the product.

The Company confirms, as stipulated in its terms of sales, that its customers hold
title to products shipped and are liable in the event of theft or physical destruction
or damage of the product.

(d) The buyer acquiring the product for resale has economic substance apart from that
provided by the seller.

The Company confirms that all of its revenue generating sales transactions are arms
length transactions with independent customers of economic substance.

(e) The seller does not have significant obligations for future performance to directly bring
about the resale of the product by the buyer.

The Company confirms that its customers are solely responsible for the sale of the
product and that the Company does not have obligations to its customers to directly
assist with or bring about the resale of its products.

(f) The amount of future returns can be reasonably estimated (paragraph 8).

The Company continued to consider the requirements of paragraph 8 of SFAS 48 and
question 9 of SAB 104, as discussed in its response on March 14, 2003 to comment #42 of
the Staff’s letter to the Company dated February 27, 2003, and found no significant
changes prior to the fourth quarter of 2004. The Company has updated the table
presented to the