SanDisk to buy Fusion-io to boost flash storage business | Hacker News Reader

SanDisk to buy Fusion-io to boost flash storage business

reuters.com

82 pointscoreymgilmore23 comments

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.

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.

My understanding is that it was Facebook who had dibs on their production, not NSA.

isn't that pretty much the same "company" as far as data sharing is concerned? :)

:D :D

It was, afaik, and we still put Fusion I/O cards into [some of] their racks.

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

That price is shockingly low.

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 ?

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.

FB uses Fusion-IO for text and metadata, not content. Most of their footprint is HDD.

It feels shockingly low because it's so much less than we've been seeing for companies that seem less valuable.

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!

Yeah, things like http://www.fusionio.com/products/ion-accelerator#specs, designed to be a (not so) mini-SAN.

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.

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.

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.

A leading company that just had intel announce them selves in the same market.

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)

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-fusion...

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.

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.

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

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