In a Flash, a Retail Boon For SanDisk

SanDisk  today agreed to purchase
msystems Ltd.  for $1.55 billion in stock, a deal
that would add another big fish to the shrinking pool of Flash memory
technology.

Both vendors make USB drives and Flash memory
 cards, coveted by makers of mobile phones, MP3
players and digital cameras, because the data is retained even when the
power is cut off.

There are two main types of Flash memory: NAND and NOR
.

NOR Flash memory has traditionally been used to store relatively small
amounts of executable code for embedded computing devices such as PDAs and
cell phones.

NAND Flash memory has become the preferred format for storing larger
quantities of data on devices such as USB Flash drives, digital cameras and
MP3 players.

SanDisk and msystems specialize in NAND; SanDisk sells to retail outlets
while msystems keeps the lower profile, selling products that fit in mobile
phones to original equipment manufacturers (OEMs) such as Kingston and Memorex.

In that regard, the vendors complement each other, and together they should
be able to insert Flash memory into more products and storage applications,
said Gartner analyst Joseph Unsworth.

Unsworth said that SanDisk is big on promoting its brand.

“Msystems has strategically pushed its view to provide as many solutions as
possible for the handset, as they feel the handset will be a leading NAND
Flash demand driver,” Unsworth said.

“By acquiring msystems, SanDisk takes their existing mobile phone Flash card
format and the in-system solution mDoc and Megasim and now has all of the
solutions in force for any means to have data storage in the handset,” he
said.

The deal will also elevate SanDisk’s position among the fellow Flash giants
like Toshiba and Micron, whose bid to buy
Lexar earlier this year has been opposed by major investor Carl Icahn.

“This strategic acquisition will give us the critical mass and complementary
products, customers, channels, technology and manufacturing base to take our
shared vision to the next level,” said SanDisk CEO and chairman Eli Harari
in a statement.

“The NAND Flash  data storage business is in its early
stages and we believe the market opportunity is largely untapped.”

In the deal, each msystems share will be converted into .76368 of a share of
SanDisk common stock. This is a 26 percent premium over the average closing
price of msystems’ shares for the last 30 trading days.

SanDisk said it expects to close the deal in the fourth quarter of 2006.