Western Digital buys flash memory maker Virident for $685 million, focus now on Fusion-io

Western Digital buys flash memory maker Virident, focus now on Fusion-io

1:34pm EDT

By Neha Alawadhi

(Reuters) – Western Digital Corp said it would buy Virident Systems Inc for $685 million as the hard drive maker and Seagate Technology Plc battle for a piece of the fast-growing market for solid-state drives used in servers. Shares of Virident rival Fusion-io Inc were up 20 percent at midday, with analysts saying the storage drive maker was a likely acquisition target for Seagate, one of the backers of Virident.Seagate and Western Digital dominate the hard disk-drive market, and have been trying to expand their presence in the faster and more energy efficient solid-state drives (SSDs) market as demand slows in a declining PC market.

Revenue from the enterprise SSD market will grow to $7 billion by 2017 from $2.5 billion last year, Western Digital said, quoting research firm IDC.

Western Digital bought troubled SSD maker Stec Inc for $340 million in June to become one of the top players in the flash drive market.

The company’s high offer price for Virident compared with that for Stec suggests that it was involved in a bidding war with Seagate, FBN Securities analyst Shebly Seyrafi said.

Western Digital was not the only company to bid for Virident, it said on a conference call with analysts.

A Seagate spokesman said it does not comment on “rumored, potential or pending acquisition”.

Virident, also backed by strategic investors Intel Corp and Cisco Systems Inc, in January signed a deal to develop and distribute flash-based hardware and software to Seagate’s customers.

FUSION-IO IN FOCUS

Fusion-io is Virident’s biggest competitor in terms of technology, and Western Digital is unlikely to buy it after its Virident acquisition, Technology Insights Research LLC analyst Nehal Chokshi said.

FBN’s Seyrafi upgraded the Fusion-io stock to “outperform” from “sector perform”, saying “the logic of a Seagate/Fusion-io deal is compelling”.

Seagate told Reuters last year it was looking to acquire smaller rivals to boost its presence in the SSD business.

Seagate shares were up 1.5 percent at $40.06.

The Virident operations will form a part of Western Digital’s Hitachi Global Storage Technologies unit, following the deal closing, expected in the fourth quarter of 2013. Virident CEO Mike Gustafson will continue to lead the team as a senior vice-president.

RBC Capital Markets was the financial adviser to Western Digital, while BofA Merrill Lynch advised Virident.

Western Digital shares were up 1 percent at $65.64 on the Nasdaq on Monday.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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