Flash memory storage provider
) recently inked a deal to acquire
), a provider of flash-based PCIe hardware and software solutions
for $1.1 billion in cash. The deal is likely to be sealed in the
third quarter of 2014 and is expected to boost SanDisk's non-GAAP
earnings in the second half of fiscal 2015.
It is worth noting that shares of SanDisk jumped 3.6% post the
announcement of the acquisition. On the other hand, shares of
Fusion-io soared 22.4% to $11.36 yesterday, higher than SanDisk's
offer of $11.25 per share.
SanDisk sells cost effective, power-efficient enterprise
solid-state storage technologies and solutions. The integration of
Fusion-io's offerings will further strengthen SanDisk's position in
the storage market. 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 stream.
Leveraging Fusion-io's hardware and software solutions, SanDisk
will be able to enhance its existing flash memory storage
portfolio. The current acquisition makes sense for SanDisk as
PCIe-based SSDs are in demand from enterprises dealing in online
transaction processing and data warehousing.
Fusion-io generated $100.5 million in revenue in the last quarter,
up 14.7% year over year. This amount if annualized would fetch
SanDisk roughly $400.0 million in revenues. Paying 2.5X of the
revenue is not a huge sum to pay, considering the company's
double-digit growth rate. This would have little impact on SanDisk,
which reported revenues of $1.51 billion in the last-reported
It is worth mentioning that of late the mergers and acquisitions in
the flash-based storage market have led to consolidation in the
overall storage market. Some of the large storage vendors who have
acquired smaller players include
Western Digital Corp.
Going forward, we remain positive on SanDisk's commentary of a
turnaround in the coming quarters and strong secular demand for its
storage products. Furthermore, the acquisition of SMART Storage
Systems is expected to expand SanDisk's offerings in the Enterprise
However, lackluster PC sales, European issues, competition from
Micron Technology and currency fluctuations could hurt fundamentals
to some extent.
Currently, SanDisk carries a Zacks Rank #2 (Buy).
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