Western Digital Craves Flash in $19 Billion Deal to Acquire SanDisk

By Pedro Hernandez

Although it pales in comparison to Dell's $67 billion bid for EMC last week in terms of sheer size, Western Digital's latest deal represents yet another major development in the market for enterprise storage products.

On Oct. 21, the Irvine, Calif. hard drive maker announced it was acquiring flash storage provider SanDisk for $86.50 per share, or approximately $19 billion. The deal is expected to close in the third quarter of 2016, pending approvals.

Western Digital claimed the buy will allow the company to double its addressable market and secure NAND-based solid-state storage technology at lower cost in the long term.

Last year, SanDisk and flash chip supplier Toshiba announced a joint venture (JV) to produce next-generation NAND memory in Japan.

The partnership "will be ongoing, enabling vertical integration through a technology partnership driven by deep collaboration across design and process capabilities," the companies said in a statement. "The JV provides stable NAND supply at scale through a time-tested business model and extends across NVM [non-volatile memory] technologies such as 3D NAND."

SanDisk also inked a long-term deal with HP last month to develop storage-class memory rivaling Intel and Micron's 3D XPoint partnership. The DRAM-replacing technology is expected to be 1,000 times faster than NAND flash and provide ample storage for real-time data analytics and other high-performance workloads.

Characterizing the deal as a "transformational acquisition," Steve Milligan, CEO of Western Digital, said the "combined company will be ideally positioned to capture the growth opportunities created by the rapidly evolving storage industry," in prepared remarks. "I'm excited to welcome the SanDisk team as we look to create additional value for all of our stakeholders, including our customers, shareholders and employees."

Milligan will remain as CEO of the combined company, which will remain headquartered in Irvine, Calif. SanDisk's headquarter are currently located in Milpitas, Calif.

Sanjay Mehrotra, president and CEO of SanDisk, said Western Digital is "the ideal strategic partner" for his company in a statement. "Joining forces with Western Digital will enable the combined company to offer the broadest portfolio of industry-leading, innovative storage solutions to customers across a wide range of markets and applications."

Yesterday, SanDisk reported its third-quarter (Q3) financial results, revealing that sales had fallen to $1.45 billion, a year-over-year decline of 17 percent. Earnings (non-GAAP) were $1.09 per share compared to $1.45 in Q3 2014.

The deal comes weeks after Western Digital announced that Unisplendour Corporation Limited, a subsidiary of Chinese state-backed Tsinghua Unigroup, was taking a 15 percent stake in the company for nearly $3.8 billion. On Oct. 19, Western Digital said it had reached an agreement with China's Ministry of Commerce to resolve one of the lingering integration issues in the wake of the multi-billion-dollar acquisition of Hitachi Global Storage Technologies (HGST) in 2011.

Pedro Hernandez is a contributing editor at InfoStor. Follow him on Twitter @ecoINSITE.

Photo courtesy of Shutterstock.

This article was originally published on October 22, 2015