SanDisk Buys Fusion-io for 1.1 Billion

SanDisk (SNDK) has announced its intentions to purchase fellow flash memory provider Fusion-io (FIO) for a reported $1.1 billion in an effort to increase its share in the flash storage business and reduce its risk in the memory chip market. Reuters reports that the payout amounts to $11.25 per share for Fusion-io, which represents 21 percent of the company’s stock price at market close June 13.

SanDisk is well-known by consumers and enterprise users alike for its flash memory chips for smartphones and digital cameras as well as USB storage drives. The company supposedly is looking to use its chips to build and sell its own solid-state drives (SSDs), which have the potential to garner bigger profits than its legacy flash memory products, Reuters. SanDisk’s SSD revenue increased by an impressive 61 percent in Q1 2014, accounting for 28 percent of the company’s total revenue.

“Fusion-io will accelerate our efforts to enable the flash-transformed data center, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership,” said SanDisk CEO Sanjay Mehrotra in a statement.

The deal is expected to both stabilize the price of memory chips throughout the industry (due to less competition) as well as help Fusion-io to get back on its feet, as the company has reported losses for the past five quarters in a row. Fusion currently provides flash memory for companies such as Apple (APPL) and Facebook (FB).

“Fusion-io was in the midst of a corporate transition toward a larger focus on enterprise solutions such as ioControl, and today’s announcement signals the likelihood that the board (FIO) saw a longer road ahead on this front,” said industry analyst Alex Kurtz in a statement. “SanDisk receives a broad IP portfolio for PCIe storage [through the acquisition] and should be able to help scale to the company’s OEM push.”

Last week, Fusion-io announced that Hewlett-Pacakrd (HPQ) would be the first OEM server partner to offer the company’s new Atomic Series flash memory platform for enterprise users. The Atomic Series is expected to hold up to 6.4TB per device and can be integrated with existing HP ProLiant Servers.

SanDisk expects the deal to close sometime in Q3 2014, although no additional information was provided. The company said the acquisition will most likely add to its adjusted profit for Q2 2015 after it is finalized.