What SanDisk Earnings Mean for Its Western Digital Merger

SanDisk Corp. (NASDAQ: SNDK) reported fourth-quarter financial results after the markets closed on Thursday. The company had $1.26 in earnings per share (EPS) on $1.54 billion in revenue compared to consensus estimates from Thomson Reuters that called for $0.89 in EPS on $1.44 billion in revenue. The same period from the previous year had $1.30 in EPS on $1.74 billion in revenue.

During this quarter, SanDisk announced two ecosystem partnerships that leverage the SanDisk InfiniFlash System; one with Super Micro Computer, and Nexenta Systems, Inc. and another with Quanta Cloud Technology.

Previously announced during this quarter, Western Digital Corp. (NASDAQ: WDC) will acquire SanDisk:

The offer values SanDisk common stock at $86.50 per share or a total equity value of approximately $19 billion, using a five-day volume weighted average price ending on October 20, 2015 of $79.60 per share of Western Digital common stock. If the previously announced investment in Western Digital by Unisplendour Corporation Limited closes prior to this acquisition, Western Digital will pay $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock; and if the Unisplendour transaction has not closed or has been terminated, $67.50 in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock. The transaction has been approved by the boards of directors of both companies.

It is worth noting that this merger is still up in the air. SanDisk and Western Digital are still subject to concerns about national security regarding China’s Unisplendour Corp. taking a 15% piece of Western Digital. If the deal falls through it could send shares cratering for both companies.

Sanjay Mehrotra, president and chief executive officer, SanDisk, commented on earnings:

I am pleased to report an excellent fourth quarter finish to 2015 driven by strong performance in enterprise and retail. We made substantial progress in the second half of 2015 in reinvigorating our portfolio, improving our product execution and expanding our customer engagements. We also achieved an important milestone in beginning our multi-year conversion to 3D NAND, with first retail product shipments and initial OEM customer sampling in the fourth quarter.

Shares of SanDisk closed Wednesday at $64.21, with a consensus analyst price target of $80.66 and a 52-week trading range of $44.28 to $87.43. Following the release of the earnings report, the stock was up 1% at $65.00 in the after-hours trading session.

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