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October 21, 2015

Western Digital Acquires Flash Vendor SanDisk

The recent spate of technology mergers resumed this week as storage specialist Western Digital Corp. announced it was acquiring flash memory vendor SanDisk Corp., for about $19 billion.

Along with acquiring greater access to the emerging market for NAND flash memory chips, Western Digital gains a new strategic partner in chipmaker Toshiba, a long-time SanDisk partner on NAND flash development. Western Digital noted that the joint venture with Toshiba would ensure a stable supply of nonvolatile memory products, including emerging 3-D NAND chips.

Western Digital (NASDAQ: WDC), Irvine, Calif., said Wednesday (Oct. 21) it would acquire all outstanding shares of SanDisk in a combination cash-and-stock transaction that is expected to include mix of cash, new debt financing and Western Digital stock. If approved, the company said the deal would double its “addressable” storage market while expanding its reach into emerging markets like NAND flash memory.

Western Digital subsidiary HGST Inc. sells hard disk and solid-state drives. China’s Ministry of Commerce recently approved a plan whereby Western Digital and HGST would integrate portions of their business, a step the parent company said would “generate additional cost synergies.”

The SanDisk acquisition “aligns with our long-term strategy to be an innovative leader in the storage industry,” Western Digital CEO Steve Milligan noted in a statement. The deal also positions the combined company to focus on the storage industry that is booming as big data analytics enters the corporate mainstream.

Milligan is expected to head the combined storage vendor. Sanjay Mehrotra, current president and CEO of SanDisk (NASDAQ: SNDK), Milpitas, Calif., will join Western Digital’s board after the deal closes.

The partners claim a complementary line of storage products, including hard disk drives, solid-state drives and, increasingly, flash memory and cloud storage products as converging IT companies target corporate datacenters.

Western Digital said the transaction is subject to approval by SanDisk shareholders. In September, Western Digital announced a 15 percent equity investment ($3.8 billion) by Unisplendour Corp. (Unis, 000938.SZ), a spinoff from Tsinghua University of Beijing. In the event that the Unisplendor transaction is not completed, Western Digital said its shareholders also would have to approve the SanDisk deal. The acquisition is expected to close in the third calendar quarter of 2016, Western Digital said.

As big data and analytics increase corporate storage requirements, hardware and storage vendors have banded together to promote emerging formats like object storage. SanDisk and other storage specialist are among the members of the Object Storage Alliance formed last year to store and analyze greater data volumes.

Meanwhile, the explosion of data driven by petabyte-scale analytic platforms like Hadoop is speeding the transition from traditional hard disk storage to solid-state technologies like flash. Analytics applications requiring speed and low-latency access to data have made more expensive flash storage more attractive. NAND flash memory also offers an array of new features like de-duplication and compression.

Storage vendors like Western Digital are attempting to catch this wave by offering a combination of spinning disk storage and solid-state arrays as corporate datacenters bulge with data requiring faster access. Hence, the storage industry is likely to see more consolidation.

“The combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry,” Milligan asserted.

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