FRIDAY ,SEPTEMBER 5 , 2008
WHY DOES SAMSUNG NEED SANDISK ?
1 .SAMSUNG needs the capacity. - SAMSUNG has enough capacity,especially in this market.
2 . SAMSUNG is attracted by SANDISK"S retail reach. - SAMSUNG has a
strong retail brand and could have leveraged its own retail channels to push
flash cards through its distribution network if it wanted to. Why do it now ?
3. SAMSUNG saves on royalty fees and the saving justify an acquisition . - Pay $ 3 billion (SNDK
market cap ) to save on $ 400 million a year ? sounds pretty good . > 10 percent ROI . But the level of
that royalty stream is not guaranteed and i dont think SAMSUNG would do a deal just to save on
royalty payments .
4 . SAMSUNG wants the IP - Sometime in the next few years , FG NAND FLASH is likely to hit
the brick wall and an alternative technology will be required . CTF has its problem and one of the
potential options is 3D memory.
SanDisk appears to have some fundamental IP in that area. Sure, Samsung could negotiate an extension to their existing cross licensing agreement with SanDisk to include 3D memory but they don’t get the knowhow.
.The knowhow is what is going to allow the leaders to scale the brick wall.
Samsung is not known for big acquisitions and its last big acquisition of AST Research 20 years ago is not considered a success. And it’s hard to imagine SanDisk’s manufacturing and joint development partner, Toshiba standing idly by as Samsung takes ownership of SanDisk’s most prized assets.
BOTTOMLINE :
An acquisition would benefit Samsung as it would gain patents for flash-memory-chip technology that cost the Korean company about $400 million in royalty payments annually, Citigroup's Kim said. A purchase may help the NAND industry recover as it may slow down production growth, Kim wrote.
