SSDs: WD acquires SilconSystems

March 30, 2009 – As further evidence that solid-state disk (SSD) drives may actually live up to their hype, Western Digital today announced its acquisition of SiliconSystems, for a reasonable $65 million in cash. SiliconSystems specializes in SSDs for embedded systems.

According to Western Digital, embedded SSDs accounted for approximately one-third (or about $400 million) of the total revenues for SSDs last year. SiliconSystems’ strengths have been in the communications, industrial equipment, medical, aerospace and military markets, and investors in the company include Samsung and SanDisk.

It was no secret that SATA drive specialist WD was planning to increase its presence in the enterprise space, but its next anticipated move was expected to be Fibre Channel and/or SAS drives. WD could still make those moves, but an (inexpensive) acquisition that jump starts the company into the nascent market for enterprise-class SSDs (as well as SSDs for markets such as “netbooks”) seems like a prescient power play.

In addition to the fact that Samsung and SanDisk are investors in SiliconSystems, it’s interesting to note that the company was founded by a former STEC executive. STEC is the early market leader in the enterprise SSD space, having locked up (exclusive for now) OEM wins with big guns such as EMC, Hitachi Data Systems, Sun, and others. It’s unlikely that those big guns will stick with a single supplier for SSDs, so WD’s entry into the market gives it a shot at second-source deals with some of those vendors.

Assuming that SSD manufacturers and their OEMs can get SSD prices down to a point that end users will actually start buying them, the SSD battle could prove very interesting over the next year.

In other SSD-related news today, startup Pliant Technology announced $15 million in Series C funding. Pliant sells Enterprise Flash Drives (EFDs) based on SSD technology and the SAS interface, which it began shipping to OEMs late last year.

For more information on SSDs, visit our SSD Topic Center

Fujitsu to bail from HDD biz

February 27, 2009 -- The hard disk drive (HDD) manufacturer ranks will be winnowed down by one with Fujitsu’s announcement that it will sell its HDD business to Toshiba. The deal is expected to close in June, and financial terms were not released. (At first, Toshiba will own 80% of the joint venture and Fujitsu will own 20%, but it will eventually be owned 100% by Toshiba.)

It’s only fitting that the contraction and consolidation in the storage industry has filtered down to the disk drive level. Who would want to be in this business, anyway? Razor thin margins, constant price gouging, competition from solid state disk (SSD) drives, and the need to double capacity and support new interfaces every 18 months, etc.

Toshiba has a tough integration challenge (remember Seagate’s acquisition of Maxtor?), but it will eventually lead to solidification of its leadership position in small form factor (2.5-inch and smaller) drives, as well as giving the vendor entry into the high-margin enterprise-class drive market. It’ll also boost Toshiba’s SSD prowess via the possible combination of Toshiba’s NAND flash memory technology and Fujitsu’s enterprise HDD technology.

But the real winners here, at least in the short term, will be Seagate, Western Digital and, perhaps to a lesser degree, Hitachi GST. Those players will almost definitely gain immediate market share due to attrition during the integration process. (Seagate experienced about a 50% revenue attrition during its acquisition of Maxtor, according to Robert W. Baird and Co., although that was admittedly a buyout on a much larger scale.)

For those of you who are insane enough to trade stocks in the volatile disk drive industry, take a close look at Seagate and WD.