Why Western Digital May Want to Acquire SanDisk

Previously in the series, we discussed SanDisk’s (SNDK) decision to seek a buyout from its peers. In this article, we’ll look at how Western Digital would benefit from a deal with SanDisk.

As the chart below shows, Intel (INTC) is a market leader in the enterprise SSD space with a 27.4% share. It is followed by Samsung (SSNLF) and SanDisk, both of which claimed a 14.7% market share in 2014. Western Digital (WDC) and Micron (MU) held 10.2% and 5.1% of the market share, respectively.

If Western Digital plans to go through with the acquisition of SanDisk, its market share will increase more than two times over the current share. Western Digital would be ahead of Samsung and only behind Intel in the SSD space.

Western Digital has aimed to increase its presence in the SSD arena, as evident from the company’s action on the acquisition front. In December 2014, Western Digital acquired Skyera, a flash storage array manufacturer in an all-cash transaction. In 2013, the company made various acquisitions in the SSD space:

• sTec, an SSD manufacturer
• Virident Systems, an enterprise flash storage company
• Velobit, a storage optimization software company

Skyera’s early investors included Dell, Micron, Toshiba, SK Hynix, and Western Digital. With Skyera under Western’s Digital’s enterprise arm, Western Digital made a strategic step to include flash array in its SSD/flash portfolio. Given Skyera’s expertise in NAND and high-density solutions, Western Digital now possesses a comprehensive portfolio of SSD storage that will help the company in gaining market share in SSD storage.

You can consider investing in the PowerShares QQQ Trust (QQQ) to gain exposure to SanDisk. The ETF invests about 0.3% of its holdings in SanDisk.