Wednesday, October 21, 2015

Thoughts on Western Digital's acquisition of Sandisk

Consolidation in memory/storage space continues with Western Digital (WDC) acquiring Sandisk (SNDK).

It's not surprising to me that Western Digital is making the move instead of Seagate.

One of the reasons I originally selected Western Digital (instead of Seagate) was the fact that they used far less leverage (debt). This kind of deal would have more difficult for Seagate.

Flipping through the the presentation on this deal, the following stands out:
  • Very little dilution to Western Digital stockholders (almost entirely cash deal financed via taking more debt)
  • Complementary portfolios: Western Digital+Sandisk will have widest ranging storage portfolio out of all other companies.
  • Combined company will have significant patent portfolio and R&D units
  • Addressable market doubles
Our IT technology portfolio is heavily tilted to storage/memory/processor theme as these are the basic building blocks that are needed to fuel the huge growth of data that is ahead of us (data being stored, processed and transferred between locations).

As there has been consolidation in all these spaces, the remaining companies have good position to extract profits from growth of data as barrier of entry to these markets is high.

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