Wed, Oct. 21, 9:32 AM
- Along with announcing a $19B deal to acquire SanDisk (SNDK +4.1%), Western Digital (WDC -2%) says it expects to report FQ1 revenue of $3.4B and EPS of $1.56 vs. a consensus of $3.28B and $1.56. Gross margin fell 90 bps Q/Q to 28.9%. With Seagate (STX -0.5%) having warned last week, the revenue outlook appears to confirm analyst suspicions Western gained enterprise hard drive share.
- Of Western's proposed $86.50/share payout to SanDisk, $85.10/share is in cash. The cash portion of the $86.50/share payout drops to $67.50/share if a planned investment in Western by Tsinghua Unigroup subsidiary Unisplendour (for a 15% stake) hasn't closed or is terminated.
- To help finance the deal, Western plans to obtain a whopping $18.4B worth of new debt facilities. It expects to continue paying its dividend, but will suspend its buyback program.
- Cost synergies are expected to reach a $500M/year run rate within 18 months; the deal is expected to be accretive to EPS within 12 months of closing (not surprising given it's mostly in cash). SanDisk's NAND flash manufacturing JV with Toshiba will be maintained.
- By acquiring SanDisk's NAND chip, controller, and SSD IP, and by gaining the ability to source NAND at cost, Western effectively neutralizes the cannibalization threat posed by SSDs/flash storage to its hard drive ops. For now, Seagate continues to rely on 3rd-party flash manufacturers; an alliance with Micron was formed in February.
- SanDisk is trading roughly 10% below Western's offer price.
Wed, Oct. 21, 8:00 AM
- SanDisk (NASDAQ:SNDK) +5.2% premarket after agreeing to be acquired by Western Digital (NASDAQ:WDC) in a cash and stock deal valued at ~$19B, confirming earlier speculation.
- The $86.50/share offer represents a 15% premium to yesterday's closing price for SNDK.
- WDC says the acquisition will double its market and expand its participation in higher-growth segments, and enable it to vertically integrate into NAND; CEO Steve Milligan will continue to serve as CEO of the combined company.
- WDC -3.1% premarket.
- Earlier: SanDisk beats by $0.29, beats on revenue
Wed, Oct. 21, 7:42 AM
Tue, Oct. 20, 5:35 PM| Tue, Oct. 20, 5:35 PM | 7 Comments
Tue, Oct. 20, 9:15 AM
Mon, Oct. 19, 5:39 PM
Mon, Oct. 19, 4:42 PM
- Six days after reporting SanDisk (NASDAQ:SNDK) has talked with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a potential sale, Bloomberg reports SanDisk is in advanced sale talks with Western.
- Negotiations are said to have "accelerated" over the weekend. A deal could be reached as soon as this week.
- Western has been viewed by analysts as a smoother fit than Micron, given it's not currently a NAND flash manufacturer - with many thinking Western needs to become one to insure itself against hard drive cannibalization by SSDs - and SanDisk and Micron respectively having NAND alliances with Toshiba and Intel.
- SNDK +8.3% after hours. WDC -3.1%. MU -1.3%. Micron joined SanDisk in rallying last week following Bloomberg's original report, fueled by expectations a deal would improve Micron's NAND scale and IP, and potentially lead to more favorable industry pricing.
- Earlier today: SanDisk gains following Korean site's M&A report
Mon, Oct. 19, 9:56 AM
- BusinessKorea reports Samsung has concluded a full-blown acquisition of SanDisk (NASDAQ:SNDK) isn't in its interests, but adds the Korean tech/electronics giant is "keeping a close eye on the unfolding situation." It also states China's Tsinghua Unigroup has shown an interest in buying SanDisk along with previously-reported Micron and Western Digital.
- Samsung dropped a $5.85B bid to acquire SanDisk in 2008. Making a fresh bid would likely draw intense antitrust scrutiny, given Samsung is the NAND flash market's largest player and could see its share near 50% if it bought SanDisk. Likewise, U.S. regulators could object to SanDisk being acquired by a Chinese firm such as Tsinghua; there was recently a quick political backlash to reports Tsinghua had bid for Micron.
- SanDisk is adding to the big gains seen last week after Bloomberg reported talks have been held with Micron and Western. Q3 results arrive on Wednesday afternoon.
Wed, Oct. 14, 12:46 PM
Wed, Oct. 14, 9:13 AM
Tue, Oct. 13, 5:38 PM
Tue, Oct. 13, 5:07 PM
- Sources tell Bloomberg SanDisk (NASDAQ:SNDK) is in talks with Micron (NASDAQ:MU) and Western Digital (NASDAQ:WDC) about a possible acquisition. No decision has been made.
- Acquiring SanDisk, which partners closely with Toshiba (OTCPK:TOSBF) on NAND flash manufacturing, would turn Micron (NAND partnership with Intel) into a heavyweight within the NAND market - Samsung and SanDisk/Toshiba are currently the market's biggest players. Micron received 32% of its August quarter revenue from flash, and 60% from DRAM. The company has been betting on 3D NAND and 3D XPoint to strengthen its flash position.
- Western has made several smaller flash-related acquisitions, as it tries to offset the gradual encroachment of SSDs/flash storage on hard drives. However, none of the buyout targets were comparable in scale to SanDisk, and Western still depends on 3rd-party NAND suppliers who also compete with the company in the SSD market.
- SanDisk +11.5% after hours to $68.90. Micron +2.6% to $18.65. Western +0.8% to $85.00.
- Earlier: SanDisk jumps on reported sale effort
Tue, Oct. 13, 4:26 PM
- Bloomberg reports SanDisk (NASDAQ:SNDK) is working with a banker to explore a potential sale.
- SanDisk and (to a lesser extent) Micron (NASDAQ:MU) have risen after hours. Numerous chipmakers have been acquired over the last two years as the industry consolidates; SanDisk would be one of the biggest if a deal occurred.
- The chairman of China's Tsinghua Unigroup (previously bid for Micron) recently suggested his company wants to be a NAND flash manufacturer, but added it's uninterested in buying SanDisk, Toshiba, or SK Hynix (assuming regulators would allow it).
- Update: Bloomberg's sources state SanDisk has held buyout talks with Micron and Western Digital.
Thu, Oct. 8, 12:56 PM
- HP (HPQ +1.8%) and SanDisk (SNDK +2.4%) are partnering to develop a a memory technology they expect will be up to 1,000 times faster and offer up to 1,000 times as much endurance as NAND flash, while also providing "significant cost, power, density and persistence improvements over DRAM technologies."
- The solution will leverage HP's Memristor R&D investments - HP once promised memristors would enable computers that instantly turn on and off, and never lose data - as well as SanDisk's ReRAM R&D investments and broader manufacturing/design resources. Target server applications include "in-memory databases, real-time data analytics, [and] transactional and high-performance computing." HP also plans to use the technology with its futuristic Machine computing concept, in which memory and storage are one and the same.
- The announcement comes less than 3 months after Intel (NASDAQ:INTC) and Micron (NASDAQ:MU) unveiled 3D XPoint, a next-gen memory tech (commercial shipments in 2016) also promised to be up to 1,000 times faster than NAND and much cheaper/denser than DRAM, and which has much in common with ReRAM.
- HP and SanDisk are both rallying. The former could be getting a boost from reports Dell is in merger talks with EMC, thanks to hopes such a deal would lead the post-split HP Enterprise to receive M&A interest. The Nasdaq is down 1%.
- Separately, HP has rolled out a 34" Envy all-in-one PC (starts at $1,800), a 12" convertible (starts at $800), and a $429 Windows 10 tablet.
Fri, Oct. 2, 1:23 PM
- Micron (NASDAQ:MU) remains up strongly after beating FQ4 estimates and issuing soft FQ1 guidance against a backdrop of low expectations. NAND flash rival SanDisk (NASDAQ:SNDK) is also rallying.
- A slew of firms with Micron targets in the $20s or higher have cut them, while reiterating bullish ratings. Credit Suisse's John Pitzer (Outperform, target cut by $9 to $25) thinks the fact Micron is staying profitable during a downcycle trumps near-term negatives. "While we remain concerned with F2Q (Feb) – (1) seasonally weaker pricing, (2) mobile mix (72% of Op Profit) weakens post iPhone 6s builds, and (3) Company specific operational improvements still geared more toward F3Q (May) – we see trough EPS ABOVE break-even ... and SIGNIFICANT Company specific drivers in F3Q – full impact of 20 nm cost downs and Inotera pricing agreement. While fundamentals are not great, trough EPS above break- even would be definitive proof of a structurally better industry."
- Susquehanna's Mehdi Hosseini (Positive) offers a similar brand of cautious optimism. "Our expectation is for NAND ASP declines to exceed that of DRAM. However, if MU can execute on cost reductions ... we possess line-of-sight to a bottoming of margins in the Nov-Feb timeframe ... we believe the risk/reward profile remains favorable at current levels, as our “worst-case” EPS scenario (~$0.90-$1.00 in annual EPS), combined with a 10x P/E would suggest ~$4-$5 downside risk from current levels, while we view upside to our PT at $7-$8." Deutsche's Sidney Ho (Buy) thinks "potential capex cuts by memory suppliers (esp Samsung) should lead to better supply-demand next year."
- Nomura's Romit Shah (Neutral): "We continue to see the bottom in Feb-qtr, as we leave our seasonal decline unchanged -5% Q/Q vs. cons. of up slightly. We see stronger leverage in 2HF16 driven by more rationale supply (potentially helped by Samsung) and a more optimized cost structure in DRAM (mainly 20nm crossover) and NAND (TLC, XPoint)."
- On the earnings call (transcript), president Mark Adams stated mobile made up a low-30s % of DRAM revenue, PCs low-20s, servers low-to-mid 20s, and specialty DRAM (GPUs, autos, networking, etc.) low-20s. Consumer products (cards, USB drives, components) made up ~40% of trade non-volatile memory revenue, mobile low-20s, SSDs mid-teens, and embedded markets (autos, industrial, etc.) also mid-teens.
- Micron's FQ4 results, guidance/details
Thu, Oct. 1, 6:51 AM
- Previous rating was Equal Weight.
- Price-target remains $75 (implied upside 38%).
- Firm expects fundamentals to remain challenging, but says downside is limited.
- Noting the increase in M&A in the group, says SNDK's assets could be highly valued by a number of industry players.
- Over the past three days, other firms have reiterated their recommendations on SNDK: Cowen (Market Perform, $58), Bernstein (Outperform, $80), Nomura (Neutral, $58), Riley (Buy, $75).
- Shares rose 10.6% Wed. in sympathy with Western Digital.
- Related: SanDisk And Micron: Relative Value (Sep. 29)
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