Feeds

SanDisk flashes $1.6bn for M-Systems

A NAND in the hand

Boost IT visibility and business value

SanDisk has started flashing even more shine following its pledge to buy Israeli rival M-Systems for close to $1.6bn.

Analysts and many customers already adored SanDisk. The company has built up a leading position in the market for flash memory products. SanDisk now looks to strengthen that position with M-Systems on its side.

"I think the deal actually makes pretty good strategic sense," said Sangeeth Peruri, an analyst with J&W Seligman, in an interview with The Register. "In NAND (a type of flash memory), intellectual property is a big deal. There aren't that many good buckets of IP.

"Now, you can envision SanDisk having all the M-Systems patents for themselves. That makes sense to me."

The deal also seemed to make sense to other financial analysts.

W.R. Hambrecht analyst Daniel Amir characterized the acquisition as a "homerun" and stuck with his "buy" rating on SanDisk. UBS's Alex Gauna called the deal a "natural fit" and kept his "buy" on SanDisk as well. Other analysts tossed out more praise, calling the companies "perfect complements" and then adding that SanDisk is the clear "flash king."

The optimism easily outweighed any concerns about M-Systems' financial health. The company is one of many to restate years of results due to improper accounting of stock options.

All told, SanDisk paid just a 13 per cent premium over Friday's M-Systems close, although it preferred to stress the "26 per cent premium over the average closing price of M-systems' shares for the last third trading days." The all-stock deal, expected to close in the fourth quarter should it meet the usual conditions, will see each ordinary share of M-Systems turn into .76 of a share of SanDisk common stock.

Peruri speculated that the relatively low purchase price might be because M-Systems will hand in an average quarter next Monday when it reports Q2 results.

M-Systems - aka M-Systems Flash Disk Pioneers - makes a wide variety of flash memory products, including some that overlap with SanDisk. Peruri expects the companies to axe some of the low-margin products that crossover, leaving an overall healthier business.

With this purchase, the flash market continues to consolidate at speed. Micron earlier this year gobbled up SanDisk rival Lexar for $850m. In addition, Intel and Micron have an agreement to produce NAND flash memory chips together, hoping to see the products make their way into cell phones, laptops and other consumer devices.

Analysts were quick to flag the likes of Silicon Motion and Saifun as two possible takeover targets for Samsung, Intel, Micron or Hynix now that SanDisk poses an even larger threat. ®

Maximizing your infrastructure through virtualization

More from The Register

next story
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Securing Web Applications Made Simple and Scalable
Learn how automated security testing can provide a simple and scalable way to protect your web applications.