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SanDisk buys Fusion-io, beefs up flash business

Posted: 20 Jun 2014  Print Version  Bookmark and Share

Keywords:SSD  flash 

NAND flash chips maker and SSD manufacturer SanDisk is acquiring Fusion-io, a maker of flash-based PCIe hardware and software for the enterprise sector. This signals the return to the solid-state storage industry of the vertically integrated business model that hampered the growth of many electronics companies in the past.

For SanDisk, the $1.1 billion cash deal expands its solid-state drive line that supports the PCI Express (PCIe) interconnect, strengthening its enterprise storage product portfolio, which includes SAS and SATA drives. Fusion-io, which does not manufacture NAND flash, will get a steady supply of parts.

"You need a broad portfolio of solutions, you need strong go-to-market capabilities as well, which we will be able to have together with Fusion-io, and you definitely need vertical integration," said Sanjay Mehrotra, SanDisk's president and CEO, in an interview with CNBC following the announcement of the deal on June 16. "So we believe that we will have what it takes to really work closely with our customers, to understand their growing needs of IT infrastructure challenges and really bring compelling solutions to them. We believe we will be best positioned in the industry for leadership in the enterprise storage segment."

SSD revenue

SanDisk has made strides in improving the mix of its SSD product portfolio with a heavier emphasis on serving the enterprise and client markets. Combined client and enterprise SSD sales accounted for 28 per cent of its 2014 first-quarter revenue of $1.51 billion versus 20 per cent in the fourth quarter of 2013. During that period, enterprise SSD revenue more than doubled on a year-over-year basis.

SanDisk's enterprise storage business, which it started in 2011, is on track to reach $1 billion in revenue next year, according to Mehrotra, who added that cloud computing applications are driving the need for faster data processing.

Prior to the purchase, SanDisk had put a lot of effort into serving its datacentre customers with its own PCIe SSD products, but still lagged behind Intel and Samsung, according to Fang Zhang, storage analyst, Electronics & Media, at market research firm IHS, Santa Clara, Calif.

"With the acquisition, it provides a potential first-mover advantage into array-like solutions compared to the other flash manufacturers, like Micron," Zhang said.

Zhang also pointed out that in addition to acquiring a wealth of IP and more sales channels, SanDisk could garner enough market-share to make it a top-three contender in the enterprise space.

"Now, by combining with Fusion-io, [SanDisk's] enterprise business has the potential to bypass Western Digital (WDC) and become third place in enterprise SSD in 2014," Zhang said.

By revenue, Intel and Samsung were the enterprise SSD leaders, accounting for 21 per cent and 20 per cent of the market in 2013. Western Digital was third, with 14 per cent, while SanDisk and Fusion-io were 13 per cent and 12 per cent, respectively, according to IHS estimates.

"For Sandisk, with the acquisition, it provides itself an impressive flash portfolio from SAS to PCI Express to DDR-based interfaces," he said.

For Fusion-io, Zhang said the sale was inevitable for several reasons, citing major executive transition, stagnant revenue growth, and lack of captive flash supply.

In May 2013, Fusion-io's chief executive, David Flynn, and chief marketing officer, Rick White, resigned. Shane Robison, the former chief strategy office of Hewlett-Packard, took over as president and chief executive. In late 2013, its chief financial officer, Dennis Wolf, also resigned. He was later replaced by former Cisco executive, Ted Hull. The company has also been in the red for many quarters, reporting a net loss of $30.7 million in its third fiscal quarter of 2014 versus a net loss of $20 million the prior year.

- Ismini Scouras
  EE Times





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