Flash memory storage vendor
) recently acquired SMART Storage Systems, a bellwether solid
state drive (SSD) storage solutions provider. The purchase
consideration includes $307.0 million cash and certain
equity-based incentives for SMART Storage Systems' employees. The
acquisition will allow SanDisk to strengthen its position in the
enterprise market for SSD storage.
SMART Storage specializes in providing SATA and SAS-based SSDs,
which are supplied to tier 1 storage and server OEMs (original
equipment manufacturer). Leveraging Smart Storage's capabilities
and intellectual properties, SanDisk will be able to enhance its
existing enterprise SSD and software portfolio, gain economies of
scale and increase share in the potential $1.6 billion enterprise
SATA and SAS space. SanDisk will be retaining the company's 250
The deal has already been approved by the boards of directors of
both companies and is expected to close by August, pending
certain customary and regulatory approvals. SanDisk expects the
deal to be slightly dilutive to earnings in second half of 2013,
before becoming accretive in 2014.
Earlier, SanDisk acquired flash memory software solutions
provider, FlashSoft Corp. in Feb 2012 and enterprise SSD
solutions provider Pliant Technology in May 2011.
At its recent analyst day (May 2013), SanDisk announced that it
expects contribution from the SSD business to grow to roughly
35.0% by 2016. The company expects that 2 out of 3 notebooks will
be enabled by flash in 2016, up from 1 out of 8 notebooks in
We believe that the synergies from the acquisition will help
SanDisk to emerge as a major player in the fast growing flash
memory market, thus lending greater stability to its revenue
Restricted wafer capacity addition will boost better
supply/demand metrics as well as pricing in 2013. Apart from
this, we are positive on SanDisk's focus on mobile-embedded
products (as several new smartphones and tablets, Ultrabooks and
other end-client PCs running on SSDs are slated for launch) and a
long-term supply agreement with
But lackluster PC sales, European issues, stiff competition from
Western Digital Corp.
Seagate Technology plc
) (in SSD space) and currency fluctuations are concerns.
Currently, SanDisk holds a Zacks Rank #3 (Hold).
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