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SanDisk Buy Fusion-io

Fusion-io is a company based in Cottonwood Heights, Utah, that specialises in designing and manufacturing products that make use of flash memory. Their Fusion ioMemory platform, for example, helps enterprise applications like virtualization, cloud computing, databases and big data by combining hardware and software. Some of their clients include giants such as Facebook and Apple.

The company employees Steve Wozniak, co-founder of technology giant Apple, as chief scientist, and is backed financially by New Enterprise, one of the biggest venture capital companies globally. This is not a small company. And yet, even with the huge data market, Fusion-io is still lacking, with weak earnings reports and a lack of market share.

The company took a stumble in May 2013 when the founders, CEO David Flynn and CMO Rick White, departed fairly suddenly. Only months later, in October, did CFO Dennis Wolff decide to depart. These three losses to the company shook up investors and made them lose faith in the firm. It’s something that Fusion-io haven’t recovered from since.

On the 16th of June, Fusion-io agreed to be bought out by SanDisk for $1.1 billion, in an all-cash deal. It valued the business at an additional 21 percent on each share, meaning that much of the year’s stock loss was gone. Despite this, however, it was still two-thirds the original evaluation of the firm’s worth and a lot of long-term investors reluctantly took the SanDisk deal.

Of course, SanDisk didn’t buy Fusion-io out of the kindest of their hearts. They saw a business opportunity and believe that it was one worth investing in. SanDisk believes the future for the company lies in targeting enterprise. When you consider the cost of Fusion-io’s drives (which cost six figure sums), it’s clear to see that this is a firm targeting others with terabytes of data. The average consumer is not going to come to them for their data needs.

Fusion-io may have been failing, but SanDisk certainly weren’t. Their shares have grown by 70 percent in the recent year and the company have become one of the leaders in the data market, allowing them to make such takeovers.

The purchase of Fusion-io is expected to fully close in the third quarter of 2014 at $11.25 a share. That’s slightly less than $11.36, the amount that the stock was valued at when it closed trading on 16th June. SanDisk, on the other hand, saw their shares soar to $102, a 3.58 percent growth. And with around $1.7 billion in cash reserves expected once the deal is done, it’s certain that SanDisk plan to continue to dominate the market.

Once the takeover is complete, Fusion-io will be fully integrated with SanDisk’s worldwide network and can begin to offer their products to all those channel partners. Fusion-io will also stop getting their storage chips from Samsung, meaning that SanDisk can be the sole provider of the technology. With SanDisk looking to transition into all-flash data centres, the company hopes that Fusion-io will be able to integrate well here and provide all the required solutions.

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