infoTECH Feature

October 22, 2015

Wheelings & Dealings: Western Digital Makes $19 Billion Move on SanDisk

Western Digital (News - Alert) has agreed to buy SanDisk in a $19 billion deal that will give Western Digital lots of leverage in storage, particularly in the growing flash storage market.

Western Digital will shell out the $19 billion in a combination of cash and stock, and with the purchase, Western Digital gains a lot of ground in the field of NAND flash memory. SanDisk is one of the biggest such suppliers of flash memory around, working with Toshiba (News - Alert) to create the chips found in a variety of drives. From the small thumb drives to larger tools, flash memory is found in plenty of places for a variety of reasons. Flash memory tends to store data more reliably—it's less prone to break down since it doesn't depend on moving parts the way standard hard drives do, which also means it uses less energy—and accesses that data more rapidly besides.

Western Digital is just ahead of Seagate Technology (News - Alert) as the largest maker of standard hard drives. Its presence in the flash drive market is a bit lacking, which this deal should address. With data centers and mobile devices turning to flash memory—and data centers and mobile devices both growing fields—Western Digital made the decision to buy SanDisk (News - Alert). SanDisk's shares were valued at $86.50 a share ahead of the deal, which in turn represented a 15 percent premium off the closing prices from Tuesday.

However, Western Digital will have some issues going into this deal; while SanDisk was a force to be reckoned with in flash memory, that perception has slipped somewhat, as product qualification delays have stepped in, and enterprise product sales have slowed. When Apple decided to switch from SanDisk chips to Samsung (News - Alert) chips, that cemented the difficulty. But with Western Digital on hand, that may change, as the company expects the deal to start contributing to earnings within 12 months of the deal closing. Conscientious

This should be good news for Western Digital; while there's always been some degree of friction between the solid state drive crowd and the hard drive crowd, there's no denying that many solid state problems are going away. Formerly expensive with little storage, solid state drives are becoming more powerful and more versatile, and that's being seen particularly in the growth of the solid-state-focused data center. Throw in the rise of mobile devices and that's a lot of new opportunity that Western Digital's bigger, moving-parts-based drives couldn't get capitalize on.

Now, however, Western Digital has the opportunity to bring SanDisk's technology forward with the Western Digital brand on it, and that could mean a big new development for Western Digital. It's a real opportunity for Western Digital to get ahead, and one that's likely to go off well as a growing market demands more fodder, fodder made better with the king of hard drives' brand of reliability involved.




Edited by Kyle Piscioniere
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