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SanDisk/Samsung Combo Would Have Complications

Eric Savitz

While SanDisk (SNDK) shares continue to trade sharply higher after Samsung said it is considering making a bid for the company, some analysts are cautioning that the notion of merging the two companies is far from a sure thing, and would involve substantial complications.

Craig Ellis, an analyst with Citigroup, says he’s skeptical that Samsung would really want to buy the company, and finds the probability of a deal to be “low.” He notes that a deal would put an end to Samsung’s royalty payments to SanDisk for NAND flash, which he sees at $414 million in 2008, $309 million next year and $215 million in 2010; and it would provide Samsung with system memory patents on which SanDisk generates substantial royalties.

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