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The Deal: Western Digital Dives Deeper Into Flash Storage

Western Digital's most recent significant deal was its $340 million purchase of solid-state drive manufacturer sTec (STEC) on June 24. A month later, Western bought Lincoln, Mass., storage software business VeloBit for undisclosed terms.

"This acquisition is a logical portfolio addition to the previously announced acquisitions of sTec and Velobit in our view," wrote Robert W. Baird & Co. analyst Jayson Noland Monday of Virident. "WD expects the recent Virident, VeloBit, and sTec acquisitions to be jointly accretive by early 2015. We estimate the Virident revenue run-rate at $50 million to $100 million. This deal was likely competitive and appears expensive on a revenue multiple basis, particularly given some sTec IP overlap."

Western also made capital investments in the space; in March it was part of a $45 million Series B financing for San Jose, Calif. solid-state drive maker Skyera.

Solid-state flash drives, which operate electronically, without moving parts, are said to perform better than magnetic drives with spinning disks.

RBC Capital Markets Corp. advised Western Digital, while Steve Miller, Jack MacDonald, Michael Altmin, Nicholas Tuosto, Fred Luminoso, Chase Thomet, and Michael Chang of Bank of America Merrill Lynch advised Virident on the deal. William Sorabella and Stefanie Wool at Kirkland & Ellis LLP were counsel to RBC on the deal.

Investors in Virident include Hercules Technology Growth Capital Inc., Artiman Management LLC, Sequoia Capital, Intel, and Cisco Systems (CSCO).

Virident didn't return calls.

Western Digital shares rose 60 cents, or 0.92%, to $65.59 on Monday afternoon.

Written by Thomas Zadvydas

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