SanDisk (SNDK) inked a deal on Monday to buy flash storage provider Fusion-io (FIO) for $1.1 billion in cash.

It's a maneuver to diversify away from the low-margin memory chip market and better align with data centers, cloud computing and more high-margin businesses.

Fusion-io makes software and hardware that help improve application performance in enterprise and hyperscale datacenters, partnering with Fortune 500 companies, including Microsoft (MSFT) and Oracle (ORCL), to improve operational efficiencies at their data centers.

This comes as more business operations and data are moved to the cloud, requiring faster processors and more efficient back-end servers.

In April, Fusion-io said its quarterly revenues rose 6% to $100.5 million, however it widened its loss and said it will likely report a loss in the current quarter.

For SanDisk, this presents an opportunity to expand beyond its NAND flash memory chips, used in smartphones and cameras as extra storage space.  

“Fusion-io will accelerate our efforts to enable the flash-transformed data center, helping companies better manage increasingly heavy data workloads at a lower total cost of ownership," SanDisk CEO Sanjay Mehrotra said in a statement.

SanDisk believes the deal, valued at $11.25 a share, will add to its adjusted earnings per share in the second half of the fiscal year. Its shares climbed 2.66% to $101.09 in recent trade. Those of Fusion-io jumped 23% to $11.42 on the news.

The purchase price reflects a premium of 21% to Fusion-io’s closing price on Friday.

SanDisk, being advised by Goldman Sachs (GS), believes the deal will close in the third quarter.

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