Maybe SanDisk / Samsung Deal Isn't Such a Good Idea

It was received almost as a done deal last Friday when news broke that Samsung Electronics was considering a purchase of struggling SanDisk Corp. (SNDK). SanDisk's battered shares rallied more than 30% while industry analysts all lined up touting the logic behind such a deal.

But now that SanDisk's stock has been on the retreat for two days and no more news of the supposed deal has surfaced, one analyst is finally raising the not so remote possibility that Samsung is more interested in manipulating SanDisk than it is in buying the company outright.

Lazard Capital Markets analyst Daniel Amir on Tuesday downgraded SanDisk to a "hold" from a previous "buy" rating, noting that its fourth-quarter results could come in below expectations, while the possibility of a rescue in the form of an acquisition by Samsung was remote at best.

"Despite news last week in Korea that Samsung is looking at potentially acquiring SanDisk, we believe that this move is highly unlikely and is aimed at putting pressure on SanDisk in its royalty negotiations," Amir wrote. He also noted that he doubted SanDisk would be willing to sell the company at its current depressed stock price.

Since Samsung and SanDisk already have a licensing arrangement, it should come as no surprise that Samsung might be interested in tactics that could help it gain an upper hand. There is, of course, still a reasonably strong case to be made for Samsung buying SanDisk outright, if it is intent on advancing its market lead further ahead of No. 2 player Toshiba Corp. (TOSBF.PK) by breaking up Toshiba's partnership with SanDisk. But it's also reasonable to assume that Samsung has all kinds of tricks up its sleeve and that it isn't necessarily interested in buying a company, just because it says so. - Andrea Orr

See Sept. 5 story on possible Samsung purchase of SanDisk from TheDeal.com