SanDisk doubled down on its strategy to target the enterprise and datacenters with a $1.1 billion all-cash acquisition of Fusion-io, which specializes in solid-state storage systems and counts Apple and Facebook as customers.
Fusion-io, which develops flash-based PCIe hardware and software tools, had been a darling, but has struggled to diversify its customer base and reset its strategy. Fusion-io has delivered a series of lumpy quarters that were feast or famine based on a limited customer set.
For SanDisk, Fusion-io moves it up the datacenter stack and plays into its vertically integrated supply chain. SanDisk's recent quarters have been propelled by the enterprise business. Sanjay Mehrotra, CEO of SanDisk, said Fusion-io will help it target the "flash-transformed datacenter."
SanDisk said it will pay $11.25 a share for Fusion-io and fund the deal through its balance sheet. The acquisition is expected to close in the third quarter and add to non-GAAP earnings in the second half of fiscal 2015. Fusion-io went public in 2011 priced at $19 a share.
On a conference call, Mehrotra said that SanDisk's enterprise business can deliver $1 billion in revenue and Fusion-io would only accelerate the pace. The deal will "position us well in enterprise storage," said Mehrotra. SanDisk had been investing in research and development for PCIe technology, but won't have to with Fusion-io.
SanDisk CFO Judy Bruner said Fusion-io's portfolio is strong and should benefit from the company standing behind it. Bruner said synergies would primarily revolve around combining the cost savings from operating as two public companies.
Fusion-io CEO Shane Robison, a Hewlett-Packard veteran brought on to revamp the company's sales model, said the SanDisk deal gives the company a better chance to deliver innovation for customers. Fusio-io's third quarter sales ending March 31 were up 14.7 percent from a year ago, but the second quarter revenue tally was down 21.6 percent from a year ago. For the fourth quarter ending June 30, Fusion-io's sales are expected to be $103.52 million.
A recent product launch from Fusion-io was expected to give the company more solid footing.
In the big picture, SanDisk's acquisition of Fusion-io could set off a series of deals. Every player in the flash storage market is beefing up to capitalize on the enterprise datacenter market. In this case, SanDisk made an opportunistic deal and snagged a company with good technology but had trouble executing. SanDisk's broader customer base could offset Fusion-io's concentrated set of clients. "With SanDisk behind it, we believe customers will deploy Fusion-io more widely," said Mehrotra. "We will be able to reach out to a broader set of customers."