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SanDisk to Acquire Troubled Fusion-io for $1.2 Billion

The deal values Fusion for about half of what it was worth in an IPO three years ago.


Chipmaker SanDisk will purchase Utah-based Fusion-io for $1.1 billion, taking a big step into the business of supplying flash memory to enterprise data centers.

The deal values Fusion-io at $11.25 per share, amounting to a 21 percent premium over its closing price on Friday. The buyout price amounts to a little more than half of what Fusion traded at when it went public on the New York Stock Exchange in 2011, the first of a handful of companies focused on flash storage technology to do so.

Fusion-io is best known for supplying flash-based insert cards that speed up traditional servers running in corporate data centers. These cards contain a lot of flash chips and, placed near a server’s main processor, can temporarily store data that’s waiting to be used by that processor — eliminating milliseconds of costly data lag to keep the processor running-full tilt, rather than waiting for a hard drive to catch up. Big customers have included Facebook, Apple and several Wall Street banks.

The trouble with its business model is that its fortunes were tied to data-center building cycles, so its revenue projections tended to be uneven.

SanDisk is paying for the deal with cash on hand. Its most recent balance sheet showed it had about $2.8 billion in combined cash and short-term investments. This is not quite SanDisk’s biggest deal ever — it paid $1.3 billion for Israel’s M-Systems, an early maker of USB thumb drives, in 2006.

The troubles have been ongoing at Fusion for a while. Thirteen months ago, CEO and co-founder David Flynn suddenly resigned and was replaced by Shane Robison, a former chief strategy officer at Hewlett-Packard. Robison had already held a seat on Fusion’s board. Flynn still owns a little more than six percent of the company, according to Fusion’s proxy filing.

The company was also known for having attracted an investment by Apple co-founder Steve Wozniak, who held a seat on its board and later was named its chief scientist. However, his role seems more for marketing purposes than anything else. Although he showed up on the floor of the New York Stock Exchange on the day of the company’s 2011 debut, as pictured above, and insisted on making the first trade for its shares, he’s not listed as a “named executive officer” on Fusion’s proxy statement.

SanDisk, primarily known as the company that supplies thumb drives and memory cards in retail stores around the world, has been making noise here and there about wanting to participate in the fast-growing world of flash-based storage in the enterprise.

Companies like Pure Storage and Violin Memory are challenging the existing storage business, which relies primarily on traditional hard drives, with products that are faster, consume less power and are price-competitive.

Speculation that Fusion might sell itself has been floating around for some time, and clearly SanDisk waited for the price to fall. As recently as last fall, speculation was that Fusion would be taken out for as much as $27 a share. That was then.

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