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$WDC revised its 1Q17 expectations to take into account its acquisition of $SNDK. The company now expects its 1Q17 revenue to be in the range of $4.45-$4.55Bil compared to its earlier forecast of $4.4-$4.5Bil. $WDC now expects 1Q17 EPS, on a non-GAAP basis to be in the range of $1.00-$1.05, compared with its earlier forecast range of $0.85-$0.90.
Needham & Company analyst Richard Kugele questions $WDC whether it will give a combined number for OpEx going forward with regards to integration. CEO Stephen Milligan says that the company will only be providing total OpEx guidance and will not be providing separate legacy $WDC or legacy $SNDK as it moves through the integration process.
$WDC said that its 4Q16 revenue was $3.5Bil. Including the $SNDK ownership, the company's non-GAAP GM was 31% and OpEx totaled $691MM. Interest and other expense for the quarter included $181MM of interest expense related to the debt for the $SNDK acquisition. Non-GAAP tax benefit was $24MM during the quarter.
$WDC said it received regulatory approval from China's Ministry of Commerce in connection with the planned acquisition by Western Digital Technologies, a unit of $WDC, of $SNDK. The decision completes the regulatory review process required for this transaction, the company said. $WDC expects the transaction to close on May 12.
CEO Steve Milligan said computer usage continues to shift from PCs to mobile devices and enterprise workloads are moving increasingly to cloud-based architectures. After completing the acquisition of $SNDK, $WDC will be better positioned to address and capitalize on these changes and opportunities, he added.
In Feb. 2016, $SNDK's Compensation Committee approved the grant of RSUs to the principal executive officer, principal financial officer, and 3 other individuals who were serving as executive officers as of last day of FY15. The RSUs vest and result in the annual issuance of stock over a 4-year period following the grant date.
In 2015, $SNDK signed strategic agreements with SK Hynix, $HPE, and Toshiba Corporation. Company also entered into a merger agreement with $WDC, giving $SNDK an equity value of about $17Bil. In 4Q15, $SNDK began initial shipment of 48-layer, 3-bits-per-cell 3D NAND technology in retail products and for OEM customer samples.
$SNDK's FY15 revenue fell 16% from FY14, impacted by product and market factors. Combined revenue from enterprise and client solid state drive solutions was 24% and removable products was 40% of FY15 revenue, versus 29% and 38% respectively in FY14.
$WDC said it announced proposed offerings of $1.5Bil of senior secured notes due 2023 & $4.1Bil of senior unsecured notes due 2024. The company intends to use the proceeds from the offerings to finance the previously announced proposed merger with $SNDK, refinance indebtedness of Western Digital and SanDisk and pay related fees and expenses.
$WDC expects to achieve total annual run-rate synergies of $500MM within 18 months post-closing of the $SNDK acquisition, and about $1.1Bil by 2020. $WDC expects to achieve rapid deleveraging, reducing debt by $3Bil within a short period of time after the closing of the deal. The $SNDK deal is expected to close in 2Q16.
On the $SNDK acquisition, $WDC said that $SNDK shareholders will receive alternate consideration as per the deal. Under the agreement terms, if the Unis Union deal has not closed or has been terminated by the time of completion of merger, $WDC will pay $67.50 per share in cash and 0.2387 shares for every $SNDK share.
As of January 3, 2016, $SNDK had cash, cash equivalents and short-term marketable securities of $4.01Bil. As of January 3, 2016, working capital balance was $3.7Bil. During 2016, $SNDK expects total capital investment to be approx. $1.7-1.8Bil, including net capital investments in Flash Ventures and the investment in non-fab property and equipment.
In 2015, $SNDK's Removable revenue decreased 11% and Embedded revenue dropped 12% versus 2014. Enterprise Solutions revenue grew 10% while Client SSD Solutions revenue fell 50%. Other revenue decreased 4%, driven by lower sales of wafers and components, partially offset by higher license and royalty.