Speculation of SanDisk Being Acquired

We cannot confirm this vague rumor from TheFly: “Shares of SanDisk have moved off their lows as takeover speculation circulates in the name. The chatter being passed through trading desks has the memory chipmaker hiring a bank after receiving a takeover approach. The companies being speculated as having interest in SanDisk include Western Digital and Seagate. Shares of the chipmaker are up 79c to $53.06 after touching $51.34 earlier in the session.” (The chatter is also that Sandisk has hired Goldman Sachs to advise the company regarding a takeover or merger in response to the offers).

But it makes sense.

Shares of SanDisk are down 44% year to date and it could be the best time to acquire the flash company even if its market cap is valuated at more than $11 billion.

Furthermore, the $6.6 billion firm recorded bad financial results these past quarters. For the last one ended June 28, 2015, SanDisk reported once again a poor period: revenue decreased 24% Y/Y and 7% Q/Q, net income being down 52% Y/Y and 108% Q/Q. But business is supposed be better in the current three-month period. Estimate for FY15 revenue remains within the range of $5.4 billion to $5.7 billion, which means a huge decline from FY14 for a company in a growing IT market: from 14% to 19%.

We are waiting for a war between Seagate and Western Digital – and maybe others (Micron, Samsung, SK Hynix, Toshiba) – to win this deal that could be an excellent acquisition target.

The two HDD makers have total cash and cash equivalents of $2.5 billion and $5.0 billion, respectively.

For one of the two companies – and for only one – it could be finally the best way to enter very seriously in the flash market to compensate the shrinking HDD market as SanDisk is a strong player in all the components of the flash industry: chips (with partner Toshiba), memory cards, USK keys, consumer and enterprise SSDs (SATA, SAS, PCIe, UltraDIMM) with their controllers, and also all-flash solutions.

Seagate as well and WD invest in flash, mainly SSDs, but encounter poor results up to now, with the exception of WD’s subsidiary HGST in enterprise units.

Maybe you remember that Seagate acquired in the 90s a 25% stake in SunDisk that became later SanDisk.