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Seagate Technology Public Limited Company Message Board

disk_investor2 3 posts  |  Last Activity: Apr 14, 2016 11:21 AM Member since: Jan 28, 2003
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  • Reply to

    Brean's Baruah-Welcome to the Idiot Club

    by madisonwisschesse Apr 14, 2016 9:44 AM
    disk_investor2 disk_investor2 Apr 14, 2016 11:21 AM Flag

    That guarantees him a life time supply of olive oil.

  • Reply to

    New 8K released - some more details

    by go_gatrz Feb 25, 2016 8:01 AM
    disk_investor2 disk_investor2 Feb 26, 2016 10:57 AM Flag

    My estimate assumes WDC's SSD sales rise to an annual rate of $1.25 B between 6/16 and 6/17. With the other estimates, Flash as 80% of SSD BOM and 40% flash margins, the internal supply of NAND flash would save WDC about $256 M during the aforementioned period.

    Other savings could come from cost cuts, etc.

  • Reply to

    New 8K released - some more details

    by go_gatrz Feb 25, 2016 8:01 AM
    disk_investor2 disk_investor2 Feb 26, 2016 8:59 AM Flag

    "The majority of the Transaction synergies are expected to come from vertical integration, allowing Western Digital to purchase NAND at a better price for its enterprise solid state drive business (7% of Western Digital 2015 revenues = $938m revenue)" So where do these huge cost synergies arise from?

    Assume WDC's SSD sales for the period 6/16 through 6/17 are $1.25 B.

    SSD margins are around 35%, so WDC's COGS for these SSDs are $0.81 B. About 80% of the COGS are for the flash memory, so that is $640 M in flash memory purchases. Flash gross margins are 40%, so by having an internal supply you save $256 M, or about half the promised synergies.

    As SSD sales increase this savings increases as long as SNDK can manufacture NAND Flash cost effectively so that WDC saves money by having an internal supply of NAND flash

    The key point that many seem to wrongfully focus on is the declining sales and profits of SNDK and using that to value SNDK to see if the deal makes sense.

    RED HERRING!

    This doesn't matter to WDC. WDC IS NOT GOING TO BE SELLING NAND FLASH.

    What matters to WDC is SNDK's ability to cost effectively manufacture NAND Flash so that it saves money by having an internal supply.

    The current risks here is that SNDK is behind INTC, Micron, and Samsung in the ramp of 3D NAND flash and the continuing decline in NAND flash prices.

    Another point being missed by brain dead Analysts is how much share does WDC gain versus STX and others in the enterprise SSD market by having an internal supply of flash?

    STX's performance enterprise drive shipments are about 40% of total enterprise drive shipments, or based on last quarter about 3 M drives, so that's 12 million drives/year. If WDC can capture 25% of these drives, that's 3 million units

    Assume $175 ASPs and 40% gross margins for these enterprise drives and that adds another $210 M in annual gross profits from the deal.

    That's just for performance enterprise SSDs, WDC could gain share in other SSD segments.

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