Yesterday, SanDisk (UNKNOWN:SNDK.DL) said it would acquire Fusion-io (UNKNOWN:FIO.DL) in a $1.1 billion deal net of cash that would strengthen its position in the enterprise market for solid-state drives, or SSDs. Fusion-io has become a leader in PCIe-based solutions for servers, in part because of its focus on software that complements its hardware.

Many storage companies are now focusing on bolstering their software capabilities, as well as buying flash memory companies. Seagate and Western Digital have each made similar moves in recent months. SanDisk will have greater scale, better NAND supply, and broader manufacturing capabilities, so it should be able to ramp up sales of Fusion-io's products. Cost saving synergies will be modest, but the real opportunity will be in revenue synergies.

The deal's premium was relatively conservative compared to what other peers are being acquired for, so SanDisk is getting a great deal on a highly complementary business. Shares have been trading higher than the $11.25 per share offer price, which implies that investors are hopeful that a higher bid will emerge.

In this segment of Tech Teardown, Erin Kennedy discusses SanDisk's acquisition of Fusion-io with Evan Niu, CFA.

(relevant segment begins at 4:16)