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SanDisk Buys Fusion-io: Fusion Indeed

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SanDisk's latest acquisition is a smart move from a strategic perspective.

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This morning, SanDisk (NASDAQ:SNDK) announced it is buying enterprise flash storage company Fusion-io (NYSE:FIO) for $11.25 per share in cash, or $1.1 billion, net of cash assumed.

This looks like a good deal for SanDisk, which has over $4 billion in net cash on its balance sheet.

As of Friday's close, Fusion-io was trading at $9.28, 78% below its all-time high. The company has suffered from executive departures and a big slowdown in growth as major customers like Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) reduced spending.

SanDisk had been beefing up its enterprise SSD offerings by buying companies like Pilant Technology, SMART Storage Systems, and FlashSoft, and Fusion-io's expertise in the PCIe SSD market makes it a logical fit.

Fusion-io also brings a lot of OEM partnerships with companies like Cisco (NASDAQ:CSCO) and IBM (NYSE:IBM), and it still has a pretty impressive client list, selling to companies like Pandora (NYSE:P), Zappos, Datalogix, Zendesk, and Rakuten.

Customer concentration is still a problem, but it isn't as bad as it was at the IPO.

Last quarter, Fusion-io customers that had more than 10% of revenues were 61% of total revenues. At its IPO (Q3 of 2011), three customers accounted for 77% of revenues.

And in any case, SanDisk is likely looking at this deal as a portfolio addition rather than simply a purchase of a revenue stream.

As of the time I'm writing this (9:25 a.m. EDT), Fusion-io is trading at $11.45, above the $11.25 deal price. There's probably some short-covering going on, but I also wouldn't be surprised to see traders grumbling about the price.

I'm not long Fusion-io, but if I were, I'd be ringing the register here on at least part of a position.

Twitter: @MichaelComeau

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