4 ms·

SanDisk to buy Fusion-io to boost flash storage business

82 points by coreymgilmore 12y ago

PaulHoule 12y ago
That price is shockingly low.
- hatred 12y ago
  Naive Query : The article mentions that it's a 21 percent premium to their present stock price. Can you throw some more light on why do you consider so ?
  - e98cuenc 12y ago
    I'm not the author of the parent comment, but I read a couple years ago that Facebook opened a full datacenter that used Fusion IO disks, and I remember something like >$1 billion on Fusion IO disks alone. There are other big users, but I guess none as big as Facebook, and I don't really know how much money they were making, but the $1.1 billion also surprised me as quite low.
    - crmd 12y ago
      FB uses Fusion-IO for text and metadata, not content. Most of their footprint is HDD.
  - TallGuyShort 12y ago
    It feels shockingly low because it's so much less than we've been seeing for companies that seem less valuable.
    - samstave 12y ago
      These guys should have made a mobile chat app instead of wasting all that time and money on something as mundane as dense, high-speed SSD storage. What were they thinking! /s
      - rossjudson 12y ago
        Yeah, things like http://www.fusionio.com/products/ion-accelerator#specs http://www.fusionio.com/products/ion-accelerator#specs, designed to be a (not so) mini-SAN.
  - phamilton 12y ago
    That was my reaction too. I guess the stock valuation seems low too then. Hardware is expensive, especially high performance hardware. R&D is a minimum 3 years and 10 million dollars per product. 1.1B is roughly a 10x on a dozen products and that doesn't include all the other operating costs. I'm oversimplifying things, but this was the thought process that concluded with 1.1B seeming low.
    - taylorbuley 12y ago
      I'm with you, and possibly for reasons beyond just the financials. If you look at the packaging, marketing and other variables (such as the likely customer of $22k/3TB of Flash) one gets the feeling that this is a very "premium" product and as such the company itself would also sell at such a premium.
  - RockyMcNuts 12y ago
    All-time high was over 40, spent much of its lifetime trading in the 20s and 30s. Below IPO and secondary offering prices. Company has over $200m in cash, so less than $1b for a leading company in a high-growth market. Company raised maybe something like $450m between IPO, secondary, and pre-IPO rounds, so not a monster exit.
    - tacticus 12y ago
      A leading company that just had intel announce them selves in the same market.
  - mbesto 12y ago
    AFAIK - there's always a premium on a buy-out/purchase. I'll try to simplify as much as possible. If 100 people (shareholders) have 100 apples (outstanding shares) and the current market rate is $10 (stock price) each, it means that when someone wants to buy all 100 apples in one go, you can jack up the price (20% premium) because all of the people (shareholders) relinquish control and therefore give up their position for a premium. (there's way more nuances here, but basically this is what happens when supply is static and demand for totality exists)
- helper 12y ago
  Anandtech suggests that fabless ssd companies are having a harder time competing[1]. In such a light, the strategic long term upside would be more important than the premium paid by SanDisk. [1]: http://www.anandtech.com/show/8177/sandisk-to-acquire-fusionio http://www.anandtech.com/show/8177/sandisk-to-acquire-fusion...
- coreymgilmore 12y ago
  I thought the same, with the 21% above closing price. > Fusion-io's shares were trading at $11.61 before the bell on Monday, suggesting that some investors were expecting a higher offer for the company. Seems like investors were looking for a higher price as well. My thought on why people think it is a low offer: the general tech world has had (shockingly) high valuations lately for companies. So when people see a "low" valuation, but still reasonable by long term trends, it is a shock. But Fusion is also hardware versus the AirBnB, WhatsApp, etc. valuations for software. Margins could be a big factor.
- Dave_Rosenthal 12y ago
  The flash business is rough. Controller technology (which used to be a big differentiating feature) is rapidly commoditizing and the NAND itself has long been a commodity. We are heading into a big price war with low margins. It hit consumer drives first but now it's coming to the enterprise. Expect more consolidation.
seiji 12y ago
Fun fact: When Fusion-io first released their hardware, the NSA purchased every production run for six months. Regular customers could get evaluation cards, but they had to wait a long time for production purchases due to the complete high speed data storage buy up.
- otterley 12y ago
  My understanding is that it was Facebook who had dibs on their production, not NSA.
  - drglitch 12y ago
    isn't that pretty much the same "company" as far as data sharing is concerned? :)
    - leccine 12y ago
      :D :D
  - eitally 12y ago
    It was, afaik, and we still put Fusion I/O cards into [some of] their racks.
kkhire 12y ago
To think everyone was phased when YouTube was bought for 1.65 billion...
- deleted 12y ago
  [deleted]
fit2rule 12y ago
Congrats Woz! Hope you made out like a bandit, old chap. ;)
djloche 12y ago
Here's the key take-away: > "Fusion-io ... has reported a loss for five quarters in a row." This is why the stock was down so low, and why they were willing to take the offer. You run a business at a loss long enough and your board starts thinking about other 'strategic options' including selling to competitors with big pockets.

82 points by coreymgilmore 12y ago

PaulHoule 12y ago

That price is shockingly low.

hatred 12y ago
Naive Query : The article mentions that it's a 21 percent premium to their present stock price. Can you throw some more light on why do you consider so ?
- e98cuenc 12y ago
  I'm not the author of the parent comment, but I read a couple years ago that Facebook opened a full datacenter that used Fusion IO disks, and I remember something like >$1 billion on Fusion IO disks alone. There are other big users, but I guess none as big as Facebook, and I don't really know how much money they were making, but the $1.1 billion also surprised me as quite low.
  - crmd 12y ago
    FB uses Fusion-IO for text and metadata, not content. Most of their footprint is HDD.
- TallGuyShort 12y ago
  It feels shockingly low because it's so much less than we've been seeing for companies that seem less valuable.
  - samstave 12y ago
    These guys should have made a mobile chat app instead of wasting all that time and money on something as mundane as dense, high-speed SSD storage. What were they thinking! /s
    - rossjudson 12y ago
      Yeah, things like http://www.fusionio.com/products/ion-accelerator#specs http://www.fusionio.com/products/ion-accelerator#specs, designed to be a (not so) mini-SAN.
- phamilton 12y ago
  That was my reaction too. I guess the stock valuation seems low too then. Hardware is expensive, especially high performance hardware. R&D is a minimum 3 years and 10 million dollars per product. 1.1B is roughly a 10x on a dozen products and that doesn't include all the other operating costs. I'm oversimplifying things, but this was the thought process that concluded with 1.1B seeming low.
  - taylorbuley 12y ago
    I'm with you, and possibly for reasons beyond just the financials. If you look at the packaging, marketing and other variables (such as the likely customer of $22k/3TB of Flash) one gets the feeling that this is a very "premium" product and as such the company itself would also sell at such a premium.
- RockyMcNuts 12y ago
  All-time high was over 40, spent much of its lifetime trading in the 20s and 30s. Below IPO and secondary offering prices. Company has over $200m in cash, so less than $1b for a leading company in a high-growth market. Company raised maybe something like $450m between IPO, secondary, and pre-IPO rounds, so not a monster exit.
  - tacticus 12y ago
    A leading company that just had intel announce them selves in the same market.
- mbesto 12y ago
  AFAIK - there's always a premium on a buy-out/purchase. I'll try to simplify as much as possible. If 100 people (shareholders) have 100 apples (outstanding shares) and the current market rate is $10 (stock price) each, it means that when someone wants to buy all 100 apples in one go, you can jack up the price (20% premium) because all of the people (shareholders) relinquish control and therefore give up their position for a premium. (there's way more nuances here, but basically this is what happens when supply is static and demand for totality exists)
helper 12y ago
Anandtech suggests that fabless ssd companies are having a harder time competing[1]. In such a light, the strategic long term upside would be more important than the premium paid by SanDisk. [1]: http://www.anandtech.com/show/8177/sandisk-to-acquire-fusionio http://www.anandtech.com/show/8177/sandisk-to-acquire-fusion...
coreymgilmore 12y ago
I thought the same, with the 21% above closing price. > Fusion-io's shares were trading at $11.61 before the bell on Monday, suggesting that some investors were expecting a higher offer for the company. Seems like investors were looking for a higher price as well. My thought on why people think it is a low offer: the general tech world has had (shockingly) high valuations lately for companies. So when people see a "low" valuation, but still reasonable by long term trends, it is a shock. But Fusion is also hardware versus the AirBnB, WhatsApp, etc. valuations for software. Margins could be a big factor.
Dave_Rosenthal 12y ago
The flash business is rough. Controller technology (which used to be a big differentiating feature) is rapidly commoditizing and the NAND itself has long been a commodity. We are heading into a big price war with low margins. It hit consumer drives first but now it's coming to the enterprise. Expect more consolidation.

seiji 12y ago

Fun fact: When Fusion-io first released their hardware, the NSA purchased every production run for six months. Regular customers could get evaluation cards, but they had to wait a long time for production purchases due to the complete high speed data storage buy up.

otterley 12y ago
My understanding is that it was Facebook who had dibs on their production, not NSA.
- drglitch 12y ago
  isn't that pretty much the same "company" as far as data sharing is concerned? :)
  - leccine 12y ago
    :D :D
- eitally 12y ago
  It was, afaik, and we still put Fusion I/O cards into [some of] their racks.

kkhire 12y ago

To think everyone was phased when YouTube was bought for 1.65 billion...

deleted 12y ago
[deleted]

fit2rule 12y ago

Congrats Woz! Hope you made out like a bandit, old chap. ;)

djloche 12y ago

Here's the key take-away: > "Fusion-io ... has reported a loss for five quarters in a row." This is why the stock was down so low, and why they were willing to take the offer. You run a business at a loss long enough and your board starts thinking about other 'strategic options' including selling to competitors with big pockets.