The hard drive maker's $19 billion acquisition is aimed at gaining better access to the flash memory storage chips used in mobile devices. Fred Katayama reports.
Another huge chip deal. Western Digital shelling out $19 billion for SanDisk. The hard drive maker wants better access to flash memory chips used in mobile devices. The deal would allow Western Digital to further expand beyond its core business into cloud computing, data centers, smartphones and laptops. SanDisk's shares rose but traded well below the offer price of $86.50. Western Digital's shares plunged That's because some investors think it's paying too much for a company that traded below $50 earlier this year, says Mark Miller, an analyst at The Benchmark Company. (SOUNDBITE) MARK MILLER, ANALYST, THE BENCHMARK COMPANY (ENGLISH) SAYING: "They had a couple of soft quarters, but people think that's behind them. The stock, like I said, at $86.50, that's quite a premium, but we did a pro-forma analysis looking at both firms' earnings power, and we come up with $9 or $10 a share, now you put a multiple of 13 or 14 on that, and the stock is at $75." The deal is complicated. Its value depends on the closing of an investment in Western Digital from China's Unisplendour Corporation. SanDisk may also need Toshiba's approval. The Japanese electronics giant uses its foundries for making chips and runs an intellectual property-sharing joint venture with SanDisk. Western Digital - SanDisk is the latest in a record number of semiconductor deals this year. Pushing companies to consolidate suppliers: demand for cheaper products to power Internet-connected gadgets.