Boston, MA 06/16/2014 (wallstreetpr) – Fusion-IO, Inc. (NYSE:FIO) has agreed to join SanDisk Corporation (NASDAQ:SNDK) for $1.1 billion in a deal that is expected to close in the second half of 2015.
The amount of money offered for Fusion-IO is almost similar to what social media giant Facebook Inc (NASDAQ:FB) paid to acquire Instagram back in April 2012.
The tie-up agreement between Fusion-IO and SanDisk is the latest move in the tech corporate world where bigger players are increasingly seeking smaller, but promising partners to support revenue and profit growth.
Understanding the deal
Shareholders of Fusion-IO, Inc. (NYSE:FIO) will receive $11.25 per share, suggesting 21 percent premium over the closing price of the shares of the company on Friday.
Fusion-IO, founded in 2005 and taken public in 2011, makes and sells flash memory products and software used in data centers. The company is best known for its Chief Scientist Steve Wozniak, who is a co-founder of the iPhone maker Apple Inc (NASDAQ:AAPL).
SanDisk intends to use its available cash on the balance sheet to purchase Fusion-IO. According to Sanjay Mehrotra, Chief Executive of SanDisk (NASDAQ:SNDK), the acquisition of Fusion-IO will enable the company to help more companies better manage their data systems in the increased data workload environment. Moreover, the deal will help the company to accelerate its “efforts to enable the flash-transformed data center.”
The acquisition of Fusion-IO, Inc. (NYSE:FIO) will also help SanDisk to protect itself against the volatility of the memory chip market. The company is turning to making and selling its own solid-state drives (SSD) rather than depending on customers who buy its chips for use in smartphones and other devices.
SanDisk recently noted that building and selling its own SSD products deliver higher profit margins. The business grew 61 percent in 1Q and contributed 28 percent of the total revenue realized in the quarter.
End of a loss era?
Fusion-IO, Inc. (NYSE:FIO) is a loss-making machine. The company has reported losses in five consecutive quarters. In the most recent quarter, it not only reported a loss, but also fell short of Wall Street expectation. It remains to be seen whether joining SanDisk will help the company to narrow its losses and turn profitable.
