A bargain for external RAID arrays
The blogs heated up this week on the news that NetApp would aquire LSI’s Engenio business.
For $480 million cash, NetApp last week acquired LSI’s external RAID storage array business (Engenio) that the company had previously sold to Original Systems manufacturers such as IBM, Oracle and BlueArc. LSI has long looked for someone to acquire this part of its business, preferring to concentrate on its RAID controllers, ONStor and 3Ware products, silicon and network processing products.
Mark Peters of ESG says: “The big ‘chatterati’ question on the Engenio transfer is how much of its current OEM revenue stream can be retained under the new ownership and how much growth (of what NetApp calls ‘new workloads’) can be achieved with its newly extended portfolio.”
Even if NetApp loses one of LSI’s OSM deals, the price they paid for the company — $480 million – will be recouped, in about a year, Peters says.
Peters’ boss Steve Duplessie, founder of ESG concurs: “An enormous percentage of the bill of material (BOM) cost of a NTAP system is comprised of disk system components supplied by Xyratex,” says Duplessie.
“Logically, we can assume that cost of the BOM component will be replaced by LSI and will lower the cost of those components by north of 15%–which goes directly to the bottom line.”
And finally from Dave Hitz, EVP and cofounder of NetApp comes this observation on the opportunity to enter new markets with Engenio products.
“While many customers and workloads do require advanced data management, some need ‘big bandwidth’ without the fancy features,” says Hitz. “For them, the best solution is a very fast RAID array with great price/performance. Perfect for Engenio! Two immediate opportunities are Full Motion Video (FMV) and Digital Video Surveillance (DVS), and over time we believe there will be more. Engenio didn’t have the partners or the sales force to reach some of these markets, but NetApp does.”
