As you note, SNDK had non-GAAP operating income of over $1 billion for 2015. But you really have to use the GAAP net income after taxes of just $389 million to make a valid argument. $389 million is not enough to cover debt service costs once the merger takes place.
But let's try to get a little more accurate, because this is an interesting question you raise, not only for me but for all SNDK shareholders who have to decide whether to sell now, or wait until after the merger takes place, receiving 0.23+ shares of WDC for the SNDK shares they deliver to WDC.
I believe that the 2015 GAAP earnings for SNDK were abnormally low, caused in part by not supplying embedded memory for the iPhone, and rectified in part because their embedded memory now meets iPhone specifications. I also believe that rapid growth in demand for enterprise servers has begun to increase profits for SNDK this year, and retail sales of microSD and related cards are probably going to increase, as more smartphone manufacturers provide a slot for extra memory. On the other side are additional costs entailed by the merger, especially a category known as "change in control," which means payments for top management and directors of SNDK whose jobs are eliminated, or who are fired as a result of the change in management.
I'm not going to guess what these additions and subtractions to net income might be. Moreover, there could be tax consequences that leave WDC with a greater tax bill than before. Eventually, however, WDC will get some tax benefits from the deductibility of interest payments on the bonds they sell to pay for the merger. For the sake of argument, let's suppose that SNDK generates only $400 net GAAP income after taxes for 2016. This will not be enough to cover estimated interest payments, though after tax deductions, it may be enough. Let's also look at the WDC hard drive business for PC's, which has been dropping and appears to be continuing to drop this year, owing to depressed PC sales.
Bottom line is that for the first year, the combined companies may generate lower earnings than before, resulting in a possibly lower price for WDC. That's my view, so on that basis, I think it is better for me to take some SNDK profits now (including making charitable contributions of heavily appreciated SNDK shares), rather than wait for the merger to be consummated.
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