In the latest in a flurry of activity in the semiconductor and storage industry, Western Digital announced today it plans to acquire Sandisk for about $19 billion. The deal, coming shortly after Dell's proposed acquisition of EMC, will likely ruffle fewer feathers but is still sure to have customer impact.
The agreement will merge two of the biggest storage vendors and will make Western Digital the largest digital storage company by revenue. In a press release, Western Digital said the transaction will increase its global scale, product and technology assets, as well as expertise in non-volatile memory, effectively doubling its addressable market.
The deal will give Western Digital a strong footprint in the burgeoning flash market, which was previously a weakness for the company. Sandisk introduced the first solid-state drive in 1991 and is the world's third largest manufacturer of flash memory.
The company also participates in a long-term joint venture with Toshiba in which it co-owns flash foundries and serves as an equal partner in flash research and development. The efficiency and cost effectiveness this vertical integration provides is a plus as component volumes and the pressure to sell at lower cost increases.
In a blog post about the agreement, storage industry veteran Marc Farley called it an "excellent move" for Western Digital. "Considering that WD has a market cap in the neighborhood of $17.6 billion and is spending $19 billion on SanDisk, there is no question they are all in with the shift to flash technology. WD still has a large disk drive business that they need to maintain, but much of the growth in their business is going to come from flash. When you look at their portfolio across the WD, HGST and SanDisk product lines, WD is going to be a real powerhouse for many years to come." Farley currently serves as a technology evangelist at Tegile.
Western Digital agrees with that assessment, saying in its press release that its product lines are complementary to SanDisk's product lines and will provide the foundation for a broader set of products and technologies from consumer to datacenter.
SanDisk is known for flash but is also working on next generation non-volatile memory products, announcing a partnership with HP two weeks ago to collaborate on the development of Storage Class Memory, which may be the successor to flash. When it combines with Western Digital, SanDisk's new organization will boast more than 15,000 patents issued or pending worldwide.
The companies expect the transaction to close in the third quarter of 2016. Western Digital CEO Steve Milligan will continue to serve as chief executive officer of the combined company, while SanDisk CEO Sanjay Mehrotra is expected to join the Western Digital Board of Directors.
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