Digital storage company SanDisk (SNDK) reported Q3 earnings today, the results of which are below. But its headline story remains its proposed acquisition by rival storage firm Western Digital (WDC) released earlier today, which plans to buy SanDisk for $19 billion, or $86.50 per share in a mostly cash deal.
Citing a number of easy synergies between the two companies, the joined digital storage facilitator will now enjoy economies of scale similar to that of the recently-announced acquisition of EMC (EMC) by Dell, Inc. And EMC is the parent company of VMWare (VMW), which announced its quarterly earnings yesterday after the bell. These companies will also be pressed to find competitive solutions regarding cloud-based computing, which has overtaken digital storage solutions over the past couple years.
In fact, the cloud computing space has become so important and instrumental to the world of Internet-based business and technology that the mere existence of stand-alone digital firms like SanDisk or VMWare — or even EMC or Western Digital themselves — is thrown into question, if not right at this moment then at least looking forward. Can we honestly say that in 5 years there will be any large data storage companies operating independently of a larger tech corporation?
Data storage used to be a hot commodity back when PCs and laptops ruled the roost of enterprise and personal digital communication. But with the onset of handheld devices, we've seen the hard-disk drive, flash memory, solid-state and data-center solutions businesses lose stature as a main focus within tech overall. Cloud solutions require lower storage costs and also provide easier, faster access and stronger security and recovery modes. Reducing the need to purchase and maintain hardware has helped make cloud-based solutions a top priority.
As such, digital storage firms have been seeing dwindling numbers in their earnings and revenues of late. And even though a company like SanDisk has managed to top earnings estimates more often than not in recent quarters, there is plenty of volatility in the space right now. SanDisk, a Zacks Rank #4 (Sell) stock prior to the Q3 earnings report, also has seen its Zacks consensus estimates for this quarter and next, as well as fiscal 2015 and 2016, drop noticeably over the past week, with projections for 2016 coming down even heavier.
All this said, SanDisk reported Q3 earnings results with 98 cents per share (accounting for stock-based compensation and other before non-recurring items) on $1.45 billion in sales. These numbers compare favorably to the Zacks consensus estimates of 65 cents per share and $1404 million, respectively.
Aside from the mega M&A deal with Western Digital, SanDisk developed key joint manufacturing deals with Toshiba and H-P in the quarter. And after dropping initially in after-market trading following the company's earnings announcement, SNDK shares are close to break-even. This followed a 2 percent gain in regular Wednesday trading, but the stock is still down roughly 20 percent year to date.
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