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Western Digital Gets SanDisk For A$26B Staff Shakeup Tipped In Asia Pacific

Western Digital Gets SanDisk For A$26B Staff Shakeup Tipped In Asia Pacific

SanDisk who were dumped by Apple have been up for sale for several months now Western Digital has emerged from a bidding dual agreeing to stump up US$19 billion in cash and stock. 

SanDisk is a major supplier of chips known as NAND flash memory-manufactured in a joint venture with Toshiba as well as thumb drives and other products that use the chips.

Western Digital, which slightly exceeds Seagate Technology PLC as the No. 1 maker of disk drives, has been facing slowing growth as more mobile devices and some data centre equipment have converted to flash memory. The technology is faster, uses less energy and is less prone to failures than spinning disks.

“We recognized the fact that there was an element of the market that we were not able to participate in,” said Steve Milligan, Western Digital’s chief executive officer, in an interview. “For quite a while we’ve been thinking about that.”

SanDisk whose products are expensive in Australia with smart buyers buying the same SanDisk products online for sometimes half the Australian retail price is also facing a slowdown in demand for action cameras which drove sales of SSD memory. 

The NAND flash memory that Western Digital will get from SanDisk is a growing part of storage in the biggest data centres.

The deal represents a 15 percent premium to SanDisk’s closing price on Tuesday in New York. SanDisk rose 2.1 percent to $76.78 at the close Wednesday in New York, reaching its highest price since March. Western Digital fell 4.6 percent to $71.44.

“WD had two potential paths. One, they could have remained conservative and bought back a ton of stock,” said Joe Wittine, an analyst at Longbow Research. “They made the more aggressive play.”

Western had a leading 44 percent slice of the market for hard-disk drives in 2014 but suffered a sales decline of 4 percent in its most recent financial year as the total disk-drive business shrank to $32.9 billion, according to figures from IDC. The market for NAND flash chips — where SanDisk and partner Toshiba. together were the largest producer — rose to $28.9 billion in 2014.

Now the conversation shifts to Seagate which also makes hard-disk drives, observers said.