Why the Fusion-io acquisition strengthens SanDisk’s position

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Sep. 2 2014, Updated 1:00 p.m. ET

Fusion-io acquisition

SanDisk has expressly shown its intention of capturing a lead space in the enterprise storage market. Its slew of acquisitions, the most recent being Fusion-io, demonstrates its ambition and plans to spruce up its enterprise storage offerings.

In June 2014, SanDisk (SNDK) announced its plan to buy Fusion-io, a storage hardware and software systems manufacturer providing flash storage solution to enterprises. The acquisition was finalized in an all-cash deal at approximately $1.1 billion.

Fusion-io: A flash storage solutions provider

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Founded in 2005, Fusion-io is a storage hardware and software systems manufacturer that combines software and memory chips to increase the rate at which server computers can access data. The company has a broad and diverse customer base of 7,000 customers across the world that includes Facebook (FB) and Apple (AAPL).

Its flash-based iDrive is preferred by leading server original equipment manufacturers (or OEMs) like IBM (IBM), HP (HPQ), and Dell. In FY 2013, the company reported $400 million in revenues. According to Storagesearch.com, Fusion-io has retained the title of “top SSD company” for the last 22 quarters as of July 2014.

The chart above shows that the total addressable market for SSDs is expected to be $41 billion by 2017.

The acquisition is likely to boost SanDisk’s wafers and components division

Fusion-io used to source chips from Samsung. After the acquisition, it will source its chips from SanDisk, boosting SanDisk’s wafers and components division. By shifting to SanDisk flash chips, the costs for the Fusion-io cards and external arrays can be reduced, leading to profitability.

Fusion-io, a key supplier of PCI-Express flash cards for servers, includes Facebook and Apple among its customers. These companies deploy server-embedded flash to accelerate database and other workloads. Fusion-io boasts hundreds of reseller partners that have deployed the ioMemory cards in products, which SanDisk can now lay a hand on and thereby expand its reseller and patent portfolio.

Fusion-io is expected to solidify SanDisk’s presence in enterprise storage and flash solutions

Fusion-io focuses on flash-based peripheral component interconnect express (or PCIe) flash card hardware and software. This is an area that SanDisk’s SSD portfolio lacks. This strategic acquisition not only complements SanDisk’s technology requirements but also enhances its customer base. SNIA reports that the PCIe interface is the largest and fastest-growing segment of the SSD market.

The SanDisk and Fusion-io association is expected to deliver real-time performance and responses to customers’ demand for faster data. The market purports that, together, they’ll create a synergy that should improve the speed of business.

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