Why Micron Should Consider Buying Pure Storage

Shares of Pure Storage Inc PSTG were trading higher by around 3 percent Tuesday morning after analysts at Susquehanna Financial Group suggested the company is an attractive takeover target with the most likely buyer being Micron Technology, Inc. MU. Micron is reportedly parting ways with its storage division head and its all-flash array software partner Excelero, Susquehanna's Mehdi Hosseini said in a research report. In fact, both Micron and Excelero deleted their respective SolidScale webpages. Meanwhile, Micron is realigning and rebranding its SolidScale under the Accelerated Solutions offering, which is geared toward hyperscale cloud customers and requires deep knowledge and expertise in firmware and software. The strategic rationale for Micron acquiring Pure Storage remains the same, including: Related Links: 3 Things Micron Accomplished With Its Stock Offering 3 Reasons Pure Storage Stock Was Downgraded ________ Image Credit: Trio3D (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

"In our view, such a chain of events serves as a referendum on how Micron views its progress cultivating higher-value solutions offerings, and points to the need for surgical M&A," Hosseini said in the report. " Furthermore, if MU is indeed moving in a different direction, this leaves a void to be filled in its goal of moving up the stack."

1. Pure Storage's FlashBlade and FlashArray align with Micron's goals as they use raw NAND modules.
2. Micron could extend Pure Storage's structure lead by providing immediate vertical integration.
3. Cost structure advantages would yield better positioning with hyperscale customers who continue to bypass traditional hardware OEMs to assemble their own systems.

"Micron may now have even greater motivation to execute such a deal," the analyst also wrote. "This is because SolidScale was slated for volume production in 2018, which implies greater pressure to identify a new partner sooner rather than later."

Susquehanna has Positive ratings on shares of Micron and Pure Storage.