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Western Digital agrees to buy SanDisk for about $19B

bloomberg.com

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Re: Western Digital agrees to buy SanDisk for about $19B

#11

Post by cmsmith »

trymas wrote: post #4

I always have thought that companies were bought for a price of it's market value (stock price * number of stocks), or if someone did not wanted pay all in cash they would've tried to compensate in other ways until market value is reached. But here WD bought SD for ~85-86$ per share, when it was worth ~75$ per share. It's at least 13% more. Does it simply mean that WD hopes that SD will rise in value rapidly? Or I im…

A couple things:

If WD were to start buying sandisk share-by-share, then the price would go up. By the time they owned 50+% their average share price would be a lot more than $86.

Owning 100% of sandisk is more than 100 times as valuable as owning 1%. With 100%, WD can tell sandisk what to do, has access to their IP, can merge steps in the production process, etc.

Re: Western Digital agrees to buy SanDisk for about $19B

#12

Post by ma2rten »

petra wrote: post #8
hga wrote: post #6

Earlier quoted context omitted.

When buying a healthy company there's generally a premium required, which is booked as "good will" https://en.wikipedia.org/wiki/Goodwill_(accounting) And all too often written off after the acquisition doesn't pan out.

>> after the acquisition doesn't pan out. Considering that this is common , one wonders - wouldn't it be better investing the $19 billion in innovation, even if in non-related fields ?

You mean like Xerox Parc?

Re: Western Digital agrees to buy SanDisk for about $19B

#13

Post by pmorici »

petra wrote: post #8
hga wrote: post #6

Earlier quoted context omitted.

When buying a healthy company there's generally a premium required, which is booked as "good will" https://en.wikipedia.org/wiki/Goodwill_(accounting) And all too often written off after the acquisition doesn't pan out.

>> after the acquisition doesn't pan out. Considering that this is common , one wonders - wouldn't it be better investing the $19 billion in innovation, even if in non-related fields ?

Considering they are only over paying by roughly 10% if you assume the current stock price is fair then they are "only" throwing away $1.9 billion. They probably can't develop their own flash technology and build a fab for that amount of investment.

Re: Western Digital agrees to buy SanDisk for about $19B

#14

Post by hga »

sschueller wrote: post #3

This sucks for consumers. Prices are already way to high for HDs and don't seem to come down anymore. It is as if there is some sort of price fixing going on.

Hmmm, when did the price decreases stop?

I last bought some high capacity drives in 2011 just before the floods in Thailand zapped the industry, and I now note I can buy twice the capacity, 2TB -> 4TB, for $35 less.

There could be demand issues, as companies like Amazon, Google, Backblaze, etc. etc. buy them in mass quantities to offer redundant cloud storage.

At the other end, SSDs have got to be eating the lunch of small-moderate capacity SAS enterprise drives, and if not now, soon enough the basic sub 1 TB drives that workstations and laptops come with. I'm very conservative with these sorts of things so I avoided jumping on the SSD bandwagon, but a recent failure of one of my Seagate 15K system disks prompted me to buy one of Intel's lowest end, lowest capacity datacenter SSDs (DC S3510 80GB) and I don't think I'm going to be looking back....

Re: Western Digital agrees to buy SanDisk for about $19B

#15

Post by rincebrain »

sschueller wrote: post #3

This sucks for consumers. Prices are already way to high for HDs and don't seem to come down anymore. It is as if there is some sort of price fixing going on.

I just bought a number of 5 TB HDDs on sale for $140, and Samsung has been driving the prices of SSDs down every iteration.

I agree it was stagnant for a while, but it's not really static now.

Re: Western Digital agrees to buy SanDisk for about $19B

#16

Post by dogma1138 »

digitalzombie wrote: post #7
sschueller wrote: post #3

This sucks for consumers. Prices are already way to high for HDs and don't seem to come down anymore. It is as if there is some sort of price fixing going on.

Yeah seriously, SanDisk own patents to flash IIRC, their stuff is always less than their competitors. I hope WD isn't going to jack up prices.

SandDisk SSD's aren't cheaper, not when you are comparing oranges to oranges, they sell allot of very very low end SSD's their performance series costs more than comparable drives from Samsung.

There are other companies that also sell cheap SSD's like Micron and Crucial but the big names Samsung, Intel, OCZ(Toshiba) usually sell quite high end devices.

Samsung pretty much blew the market out of the water with their Evo series it comes very close to the performance of it's Pro series and other high end SSD's out there where it comes to real world use at a fraction of the cost. It brought the costs of SSD's down to less than 350$ per TB while keeping outstanding performance and life span.

Re: Western Digital agrees to buy SanDisk for about $19B

#17

Post by anoother »

hga wrote: post #14
sschueller wrote: post #3

This sucks for consumers. Prices are already way to high for HDs and don't seem to come down anymore. It is as if there is some sort of price fixing going on.

Hmmm, when did the price decreases stop? I last bought some high capacity drives in 2011 just before the floods in Thailand zapped the industry, and I now note I can buy twice the capacity, 2TB -> 4TB, for $35 less. There could be demand issues, as companies like Amazon, Google, Backblaze, etc. etc. buy them in mass quantities to offer redundant cloud storage. At the other end, SSDs have got to be eating the lunch of…

Really?

Before the flood, I seem to remember you could get a 1TB Samsung F1 7200rpm drive for £30.

Now, an equivalent drive will set you back around £35, and it's taken a long time to reach that level...

Re: Western Digital agrees to buy SanDisk for about $19B

#18

Post by Eric_WVGG »

sschueller wrote: post #3

This sucks for consumers. Prices are already way to high for HDs and don't seem to come down anymore. It is as if there is some sort of price fixing going on.

well if you’d like to look at the bright side, one less decision you have to make

Re: Western Digital agrees to buy SanDisk for about $19B

#19

Post by toyg »

anoother wrote: post #17
hga wrote: post #14

Earlier quoted context omitted.

Hmmm, when did the price decreases stop? I last bought some high capacity drives in 2011 just before the floods in Thailand zapped the industry, and I now note I can buy twice the capacity, 2TB -> 4TB, for $35 less. There could be demand issues, as companies like Amazon, Google, Backblaze, etc. etc. buy them in mass quantities to offer redundant cloud storage. At the other end, SSDs have got to be eating the lunch of…

Really? Before the flood, I seem to remember you could get a 1TB Samsung F1 7200rpm drive for £30. Now, an equivalent drive will set you back around £35, and it's taken a long time to reach that level...

Physical disks are not going down in price because their market volume is shrinking, their technology is just not evolving. On consumer machines, the 5400rpm drives are being replaced by other 5400 or by SSDs, not by 7200rpm. So the 5400 disks don't go down in price, whereas SSDs do (albeit slowly, due to technological constraints).

Re: Western Digital agrees to buy SanDisk for about $19B

#20

Post by mbesto »

petra wrote: post #8
hga wrote: post #6

Earlier quoted context omitted.

When buying a healthy company there's generally a premium required, which is booked as "good will" https://en.wikipedia.org/wiki/Goodwill_(accounting) And all too often written off after the acquisition doesn't pan out.

>> after the acquisition doesn't pan out. Considering that this is common , one wonders - wouldn't it be better investing the $19 billion in innovation, even if in non-related fields ?

This is a common misconception by non financial people (no offense). You have to look at this from a finance and risk perspective.

1. Cash lying around in your bank account is usually a poor use of working capital (you are effectively "losing" money by it sitting in the form of cash)

2. Investing in "innovation" is always risky. Look at how many internal Google apps get scrapped a year or two into launch. They effectively write those off and it's a direct loss to Google's bottom line.

3. "Innovator's Dilemma" - big companies realize they are not the best suited to invest in innovation, hence why startups and buying them are actually a net positive for large businesses.

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