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Data Storage Businesses

Western Digital To Buy SanDisk (reuters.com) 99

An anonymous reader writes: Reuters reports that Western Digital will buy SanDisk in a deal worth roughly $19 billion. In a press release, WD said, "The combination is the next step in the transformation of Western Digital into a storage solutions company with global scale, extensive product and technology assets, and deep expertise in non-volatile memory (NVM)." SanDisk has been in business since 1988, and primarily "manufactures flash memory chips and other digital storage for personal computers, data centers and consumer electronics, including smartphones and tablets." They have over 8,000 employees, compared to WD's ~76,000. This follows another major transaction in the storage market, when Dell bought EMC last week.
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Western Digital To Buy SanDisk

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  • by TFlan91 ( 2615727 ) on Wednesday October 21, 2015 @10:38AM (#50773139)

    I don't like the recent tread of consolidation in the IT market... This needs to stop.

    • by Kohath ( 38547 ) on Wednesday October 21, 2015 @11:00AM (#50773321)

      Ok, we'll stop it. We didn't know it was bothering you. Sorry.

      signed -- Worldwide IT Business

      • by Anonymous Coward

        Of course they won't stop voluntarily. That is why we have anti monopoly laws that needs to be enforced if a competitive market is to remain.

        • Please! Mark parent as Funny

          • While GP may have been right in principle, the fact is that Western Digital and Sandisk were in two related, but completely different markets. One made hard disk drives, and only moved into SSDs when the latter started getting popular as a successor to HDDs. The other has been making flash memory throughout its history of all form factors ever defined - Compact Flash, MMC, SD cards, xD cards, Memory Sticks, Micro-SDs, Memory SIMs, you name it!!! Two completely different product genres for completely di

      • by CODiNE ( 27417 )

        This has our backing as well.

        signed -- The Elders of the Internet.

    • by CanadianMacFan ( 1900244 ) on Wednesday October 21, 2015 @11:30AM (#50773603)

      The problem is that stock markets still expect the large companies to post revenue growth at the same rates as they did when they were smaller companies. Of course as they get larger and larger it becomes harder to keep up such growth. Growing a $10M company 5% is a lot easier than a $10B company. So they resort to buying other companies to get their growth. Or layoffs in order to improve their income statement.

      Not that I agree with the methods because they are doing them just to help the stock price.

      • If your business $1B cash, that adds $1B to its value.
        If your business owns $800 million worth of Sandisk, that adds $800 million to its value.

        Therefore, spending $1 billion to buy a company worth less than $1B HURTS the company's value. See HP for some dramatic examples.

        The value (stock price) increases only if you get a good deal on the purchase, if you buy a company for less than it is worth. So companies make aquisitions when they think they're getting a good deal. Who doesn't like getting a good deal

        • Therefore, spending $1 billion to buy a company worth less than $1B HURTS the company's value. See HP for some dramatic examples.

          Not always true. For one example: Company A buys company B for $2.2B, but company B is only "worth" $2B. You say company A is taking a $200M loss. Looks bad at the outset, but looks can be deceiving... read on:

          But what if Company B had the potential to be a $4B value, but lacked, say for the sake of argument, $800M to ramp up production. Then Company A, that has the capital, would GAIN $1B for their investment ( 2.2B + 0.8B = $3B spent for a $4B company ). I would consider this a "good deal" on the purch

          • by tomhath ( 637240 )
            They still wasted $200M by giving $2.2B for a company that was only worth $2B.
            • Except that in reality, if they want Company B's shareholders to approve the transaction, they need to show them some value. Company B's shareholders could liquidate their shares for $2B on the market any time they want, or they could get $2.2B (on paper, and perhaps more) by approving this deal in a timely fashion and not raising a stink.

              Add it to the cost of business.

          • Therefore, spending $1 billion to buy a company worth less than $1B HURTS the company's value. See HP for some dramatic examples.

            Not always true. For one example: Company A buys company B for $2.2B, but company B is only "worth" $2B. You say company A is taking a $200M loss. Looks bad at the outset, but looks can be deceiving... read on:

            But what if Company B had the potential to be a $4B value, but lacked, say for the sake of argument, $800M to ramp up production. Then Company A, that has the capital, would GAIN $1B for their investment ( 2.2B + 0.8B = $3B spent for a $4B company ). I would consider this a "good deal" on the purchase, even if it LOOKS bad at the outset.

            There is also the situation where Company A is at a disadvantage in the marketplace (i.e. behind in technology, etc.) and company B has the technology that they need to compete. The 200 Million extra spend could easily be eaten up by R&D costs and lost market share. This could be a strategic purchase, not a financial one. The Forbes article below says that WD had SSD sales of around $500 million while Samsung has sales over $3 Billion in 2014. It also outlines the SSD technology companies that WD ha

            • > The 200 Million extra spend could easily be eaten up by R&D costs and lost market share. This could be a strategic purchase, not a financial one.

              The company I work for was just aquired under just such a scenario. The board had three options:

              R&D the needed tech: $40 million
              Lease license the needed tech: $30 million
              Buy a company who had the tech: $20 million

              That IS a financial decision, I'd say.

              Ps - I don't know how many million the actual costs were for the company I work for. I do know that

          • I was talking about actual value of the purchase, not book value.

            If adding 0.8B will make it worth $4B, it IS worth approximately $3.2B, in terms of whether or not it's a good deal. That's the value I was speaking of.

            Since it's worth 3.2 to company A, if they buy it for 2.2, they got a good deal. When valuing companies with significant growth potential, you do in fact factor that potential into the value, so much so that it's often a much larger factor than book value.

        • But a company rarely pays all cash to buy another company. It offers it's own stock in exchange for the stock of the other company and sometimes it's stock plus cash. This may cause some problems with dilution of the stock as more stocks are on the market but this is partially offset because the expectations for the larger company are higher (or at least should be).

          There are times when you are more than willing to pay above what the market thinks a company is worth. For example if you can lock your compe

          • by KGIII ( 973947 )

            When I sold my business the, now parent, company paid XX in cash and XXX (about 2.5x as much) in shares in the parent company. Some such law prevented me from divesting those shares for 6 months after the sale. I'm not sure if it is the same with companies which are public, mine was not.

      • by MachineShedFred ( 621896 ) on Wednesday October 21, 2015 @12:57PM (#50774543) Journal

        Not entirely true.

        There's the concept of a 'growth' stock versus a 'value' stock. Several tech companies (Microsoft, Apple, others) have transitioned into value stocks by starting to pay dividends, stock buybacks, etc.

        Wall Street doesn't *only* care about growth. There's plenty of companies that have single-digit year-over-year gains that do very nicely.

        • Wall Street still wants to see Apple and Microsoft to have good growth numbers, Apple especially. Analysts are expecting Apple to have an average annual earnings growth rate of 15% [nasdaq.com]. From the same site Microsoft is expected to grow it's earnings at just over 8%.

          • And the "analysts" repeatedly do not listen to guidance from Apple, and then attempt to penalize them when Apple performs exactly as they predicted. These are the same "analysts" that predicted that the iPhone 5C should be a low-cost entry into the 'race to the bottom' that the rest of the mobile manufacturers have going on, trading margin for market share. Then, when Apple didn't do that (because they aren't concerned with growing market share at the cost of gross margin) they declare that model to be a

    • by Solandri ( 704621 ) on Wednesday October 21, 2015 @12:16PM (#50774089)
      The HDD market had some of the slimmest margins in the tech industry - about 1%-2%. The HDD manufacturers just weren't making enough money to even keep up with basic R&D. It needed to be consolidated. The floods in Thailand happened to be the straw that broke the camel's back. Unfortunately, they happened right in the middle of the last recession, resulting in what's probably over-consolidation.

      The WD-Hitachi merger still isn't finalized. China hasn't given their final approval. My brother-in-law is working on this for WD and is pulling his hair out over how obtuse the China government has been.

      WD has been buying SSD manufacturers for a while now. Silicon Systems in 2009, then sTec, Skyera. SanDisk is a much bigger name, but this isn't something they just started doing.
  • What does WD do with 76,000 employees? R&D? Manufacturing? Sales? Distribution?

    That just seems like a lot of employees.

  • by sunderland56 ( 621843 ) on Wednesday October 21, 2015 @10:53AM (#50773265)
    What we learned today: Western Digital still exists.
    • by nukem ( 126381 )

      They also own HGST.

    • by Tukz ( 664339 )

      WD are huge in the regular consumer market.
      Nearly everyone I know buys WD for storage disks.

    • What we learned today: Western Digital still exists.

      Wait you didn't know? But that must mean you use Se.... DUDE backup your data NOW while you still can.

    • I buy only WD, their low power/heat drives are perfect for my NAS and have been completely reliable for over 10 years, after that I don't know because it's way past time to swap out for a bigger drive.
  • Writing on the wall (Score:5, Interesting)

    by sshir ( 623215 ) on Wednesday October 21, 2015 @11:00AM (#50773323)
    So WD realized that hard drive business is kaput.

    No wonder we're still waiting for a 8TB consumer drive from them. They are curbing research spending...
    • by Kjella ( 173770 )

      Kaput? Not really, but you only use hard drives for $/TB which means you get hardly any premium for packing it denser. Also streaming is taking over from storing, people watch YouTube and Netflix (and watch&delete torrents) instead of trying to archive everything. The main consumers of hard drives are now large datacenters (and a few slashdotters) running huge RAID boxes.

      • Another factor here is that the "enthusiast PC gamer", long a major consumer of large hard drives, is moving rapidly onto SSDs.

        Too many recent games; Watch_Dogs, Dragon Age: Inquisition and, Far Cry 4, to name some of the most serious offenders, have suffered from in-game stutter when running from mechanical drives. The trend towards open-world gaming and higher resolution textures that's picked up speed since the introduction of the PS4 and Xbox One (which remain the main target-platforms for most games) h

      • by swb ( 14022 )

        I would say not kaput, but you can probably see it from here.

        If innovations like 3D Xpoint from Intel and other "better" flash technologies happen that improve on durability and performance while keeping prices at or below other flash tech, it sure seems to me that the rotational media market will get even thinner.

        There may be some market for rotational media as a way of providing vast quantity now in very large tiered storage systems, but these kinds of systems are probably already flash tiered.

        But any kin

        • It's hard to say no to a 10-20% price bump when the value add is a half million IOPS and crazy throughput.

          ...not to mention the reduction in power usage.

          • by swb ( 14022 )

            After I wrote the above post I realized I didn't factor in power.

            I don't think most SMBs care about power. From my experience, the power savings for them wouldn't even be a consideration. Most might see their (usually inadequate) UPSs gain a few more minutes of run time and their air conditioning work a little better, but by and large it's not really a thing for them.

            But at the very large enterprise, I'd almost bet the power savings would be worth the investment in additional floor space if they had to a

            • by sshir ( 623215 )
              There are SSDs which are higher density than HDs. Samsung showed 16gig device few weeks ago: PM1663a
    • 8TB (Score:4, Informative)

      by JBMcB ( 73720 ) on Wednesday October 21, 2015 @11:27AM (#50773563)

      I interpret their relative slowness to market as doing proper testing before releasing product.

      I had an array of 4 western digital 4TB drives. Added 2 Seagate 6TB drives, as they were the only company that produced them at the time. One failed after six months - replaced that one, the second died after another 4 or 5 months. I quickly bought two 6TB WD drives and mirrored the data before both Seagate drives failed again. The old 4TB WD drives are still running fine, as are the new 6TB drives, two years later.

      • I interpret their relative slowness to market as doing proper testing before releasing product.

        A hard drive maker TESTING products before releasing it to the masses? You cannot be serious... If you can get the SMART testing to pass in the factory and there are enough good sectors to get you the advertised size, ship it. Time is money, especially in commodity markets like this.

        • by JBMcB ( 73720 )

          Then again, a high enough failure rate will eradicate the profit margin on your product, especially on low-margin commodity items.

        • You do realise storage technology fundamentally changed above the 6TB mark right? It's less about testing the product as testing the new technology.

        • I am a WD beta tester. I can assure they do beta test their products with real people before release. Best part of being a tester...you get to keep all the gear.

    • Re: (Score:2, Informative)

      by Anonymous Coward

      Flash prices are in freefall and package density is increasing proportionally.

      We're starting to reach the point where flash is out-scaling hard drives on the high end. With hard drives you run in to really hard problems to solve when you try to cram a lot of platters in to a tiny space, and then try to mass-produce the things. Moving parts are the bane of.. Well.. Everything.

      With flash you simply pack on some more chips. We're already starting to see SSDs that have a higher density and larger capacity than

    • No wonder we're still waiting for a 8TB consumer drive from them.

      That might be enough to hold Star Citizen. I hope they can get it out in time.

  • As long as they don't bother encrypting them.
  • But I recently rebuilt my FreeNAS file server with five 1TB WD Red NAS hard drives for $50 each. A nice upgrade over the Seagate and Hitachi drives that all reported heat-related errors after five years of 24/7 service.
    • by 0123456 ( 636235 )

      WD's 3TB Green drives have been problematic for me. I've had about a 33% failure rate. Their other drives have been fine, with some 1TB and greater consumer drives still running after over 40,000 power-on hours.

      Of course it may just be bad luck on my part with the 3TBs.

      Sandisk SD cards, on the other hand, have all kinds of corruption problems with my dashcams, which went away when I replaced them with cards from another manufacturer. Hopefully WD's SSDs won't be so bad.

  • I loved SanDisk's Sansa Fuze. I prefer to have a separate device for my music. Unfortunately, all the subsequent versions really sucked. I hope Western Digital creates a worthy successor.

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