SanDisk Corporation (SNDK) Is Buying Fusion-IO, Inc.

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By Carly Forster

Fusion-IO, Inc. (NYSE:FIO) is a Cottonwood Heights, Utah based computer hardware and software systems company that designs and produces devices using flash memory technology.  Fusion-IO Memory expedites businesses from the smallest e-tailers to the world’s largest data centers and Fortune 500 companies. On Monday, June 16, SanDisk Corporation (NASDAQ:SNDK) announced that they will acquire Fusion-IO for a total of $1.1 billion.

SanDisk will pay Fusion-IO $11.25 per outstanding share in an all cash deal, a 21% premium to Friday’s closing price. SanDisk Corporation (NASDAQ:SNDK) CEO Sanjay Mehrotra said in a statement, “Fusion-IO will accelerate our efforts to enable the flash-transformed data center, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership.” The acquisition is on track to be completed in the third quarter of 2014 and will start adding to SanDisk’s non-GAAP proceeds in the second half of 2015.

Fusion-IO, Inc. (NYSE:FIO) last reported their first quarter earnings on April 23 of this year. They are expected to report their second quarter earnings on August 6, 2014.

Shares of Fusion-IO, Inc. (NYSE:FIO) opened at $11.44 on Monday, June 16. The software company has a 1-year high of $15.59 and a 1-year low of $7.77. The stock’s daily moving average is $11.39 and had a 50-day moving average of $8.38. The market cap for Fusion-IO is $1.23 billion and its P/E ratio is not applicable.

On June 16, Needham & Co analyst Richard Kugele lowered his rating for Fusion-IO, Inc. (NYSE:FIO) from BUY to HOLD. He reasoned that the acquisition “is a great deal for SNDK, though perhaps a hollow victory for FIO, with the price below even the low-end of recent deals for a tech-rich company.” Kugele has a +14.7% average return on all stocks and a 70% success rate in making recommendations. He has a +15.4% average return on Fusion-IO.

RBC Capital analyst Amit Daryanani also reiterated a Sector Perform rating for the stock on June 16. He noted, “Fusion-IO, Inc. (NYSE:FIO)’s take out valuation of $11.25/share in cash (or $1.1B net of cash assumed), multiples of ~2.0x NTM, 1.8x CY14 and 1.6x CY15 sales. Notably, this multiple is well below historical flash take-out valuations which have had a median valuation of 6.2x and an average valuation of 9.2x.” Daryanani has a +7.4% average return on all stocks and a 70% success rate in making recommendations.

Fusion-IO, Inc. (NYSE:FIO) currently has an analyst consensus of HOLD.

To view all Fusion-IO recommendations, visit TipRanks today.

Carly Forster writes about stock market news. She can be reached at [email protected]

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