The importance of Solid State Drive (SSD) technology for SanDisk (NASDAQ:SNDK) can hardly be over stated. While the adoption of flash for enterprise storage is still in its early stage, the solid state drives (SSDs) have already started replacing the spinning hard disk drives (HDDs) in small laptop computers and tablet computing devices in a big way. A similar trend can be expected in the enterprise storage market in the near future.
Identifying this trend, SanDisk announced the acquisition of FlashSoft last month. FlashSoft offers caching software to enhance the power of enterprise flash storage. As SanDisk aims to capture the huge opportunity in the enterprise flash storage market, FlashSoft’s software could be a welcome addition that will improve the attractiveness of the company’s enterprise solutions. 
Given the vast potential opportunity for SSDs in both enterprise and consumer market, we estimate that SSD memory is already the most valuable product segment for SanDisk, making up nearly 30% of the company value. We currently have a $54.20 Trefis price estimate for SanDisk, about 8% above the market price.
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SSDs are valuable for SanDisk as they cater to three potentially huge end-markets:
1. Rapidly Growing Tablet Market
- The mass adoption of tablet computing devices that typically employs SSDs for local storage will make tablet SSDs a major revenue driver for SanDisk in the coming years.
- We believe that the global tablet market will grow at a staggering 40% annual rate going forward, reaching about 520 million units by 2018.
2. Coming of the Ultrabooks
- With major players in the PC business making a push into Ultrabooks – the extremely light, fast and portable notebooks – it seems inevitable that Ultrabooks will be the norm in the coming years, almost wiping out the traditional notebooks and their smaller cousins – netbooks.
- Since Ultrabooks typically employ SSDs for local storage, this is going to be another major driver for SanDisk’s revenue and profits in the future.
3. SSD Adoption in Enterprises on the Rise
- In the era of Cloud and Big Data, enterprises are finding it increasingly difficult to access and process massive amounts of data at rapidly increasing rates with the traditional disk-based storage systems. They need a storage infrastructure which is faster (i.e. which supports more operations per second) and is more reliable.
- Flash is viewed as a viable alternative by many organizations that are deploying flash arrays for their cache (most actively accessed data) needs. This has fueled demand for enterprise-grade SSDs, and we expect this trend will continue in the coming years.
All these above factors make SSDs a much more valuable division to SanDisk in comparison to flash cards, which currently is the biggest product segment for the company by revenue.Notes: