Before market open on Tuesday, SanDisk announced the acquisition SMART Storage Systems, a supplier of solid state drives (SSDs) based on SATA and SAS interface technologies. SNDK has agreed to pay $307m in cash and equitybased incentives to acquire SMART and expects the deal to close in August 2013. The acquisition is expected to add roughly 250 people to SNDK’s headcount upon closing.
This is another in a sequence of acquisitions targeting the Enterprise/Industrial storage market. SMART Storage Systems offers a range of SAS enabled storage options which should fit in with SNDK’s existing product portfolio. SNDK has made a concerted effort to target higher margin markets and this acquisition is consistent with this strategy. Many analysts believe acquisitions are a smart strategy for SNDK given time to market; customer relationships are key to success in the Enterprise SSD market, and the company has high levels of cash on the balance sheet. We note this is the company’s fourth Enterprise SSD related acquisition in the past few years (Pliant, FlashSoft, Schooner).
SanDisk is likely to benefit from more balanced supply & demand environment in 2013 and should help the company return to revenue growth. However, some analysts believe the company is unlikely to sustain the pace of revenue growth necessary to drive EPS above previous cyclical highs given margins headwinds.
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