On Wednesday, hard disk storage giant Western Digital announced it was buying flash drive maker SanDisk in a $US19 billion deal.
This deal would solidify Western Digital claim as a global storage behemoth.
But a company never takes out another company just to increase its footprint. They do it to increase value for shareholders.
“I’m excited to welcome the SanDisk team as we look to create additional value for all of our stakeholders,” CEO Steve Milligan said explicitly.
One way managers do this is by eliminating redundancies in their efforts to cut costs. They call it “synergy,” which is a word that probably has every Western Digital and SanDisk employee a little nervous. The company explained in the news release:
“The company expects to achieve full annual run-rate synergies of $US500 million within 18 months post-closing. The transaction is expected to be EPS accretive on a non-GAAP basis within 12 months of the transaction close.”
“Synergy” usually means the closing and combining of offices and warehouses, which also often comes with job cuts.
This is a very rough calculation, so take this with a grain of salt. But assuming half of those potential synergies ($US250 million) come from reduced headcount and each worker saves $US150,000, this back-of-the-envelope calculation would see more than 1,600 employees being let go.
The companies haven’t actually announced or quantified any reductions in headcount just yet. But you can bet that announcement is coming.
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