Boston, MA 06/18/2014 (wallstreetpr) – SanDisk Corporation (NASDAQ:SNDK) has announced it will be buying Fusion-io Inc. for $1.1 billion as it looks to bolster its fast growing business of providing flash storage drives to companies. The deal is to be sealed in the third quarter and expected to boost SanDisk’s earnings as early as the second half of 2015.
SanDisk to Use Fusion-io Inc. Technology
Founded in 2005, Fusion-io Inc. has struggled with increased losses since going public in 2011. SanDisk Corporation (NASDAQ:SNDK) is, on the other hand, acquiring it as it sees its brighter side in terms of its technology that can be used on a variety of storage products. SanDisk is currently using NAND memory chips for building and selling its own solid state drives.
Flash drives are expected to continue offering SanDisk higher margins compared to the sale of memory chips for smartphones and cameras. The company has in the recent past been positioning itself as an enterprise storage company with the Fusion-io Inc. deal expected to propel this even further. Acquisition of Fusion-io Inc. by SanDisk comes as bigger chip companies continue to buy smaller companies with specialized technology that can be used to enhance other operations.
Fusion-io Inc. to Buy Chips from SanDisk
Fusion-io Inc. currently does not buy any chips from SanDisk Corporation (NASDAQ:SNDK) but is expected to do so once the deal is finalized according to SanDisk’s Chief Executive Officer Sanjay Mehrota as Vertical integration continues to be key in becoming a champion in the enterprise storage market. SanDisk Bid Price of $11.25 a share represents a 21% premium of Fusion-io Inc.’s closing price as of Friday. The price is also less than the IPO’s price of $19.
Acquisition of Fusion-io Inc. comes at a time that SanDisk’s SSD business has been growing at a rapid pace seen by the fact that first quarter revenue on this segment was up by 61%. A merger with Fusion-io Inc. Essentially means that opportunities can only be endless considering its customers includes the likes of Apple Inc. (NASDAQ:AAPL) and Facebook Inc. (NASDAQ:FB).
