Costa Mesa, Calif.-based Emulex said Tuesday it reached a definitive agreement to acquire Roseville, Calif.-based Sierra Logic for US$180 million to expand its position in the embedded storage components market.
Mike Smith, Emulex's executive vice president for worldwide marketing, characterized Sierra Logic as a leading provider of bridges, routers and Serial ATA (SATA) drives -- the embedded storage infrastructure that Emulex has been targeting. The key objective is to accelerate revenue growth potential and help Emulex grow the market from $1.4 billion to $2.7 billion in 2009, he said.
The acquisition will combine two suppliers of network storage components and may improve the reliability of storage networks that enterprise customers depend on.
Sierra's line of embedded bridges and routers will join Emulex's portfolio of embedded switches and multiple protocol I/O controllers. The combination will make Emulex more competitive in selling to storage system makers, Smith said. Emulex's current customers include Sun Microsystems Inc., Hitachi Global Storage Technologies and Network Appliance Inc.
"There is always a trend toward integration, and you can offer more integrated solutions the more pieces you provide. It makes you more of a single, trusted supplier," Smith said.
The deal gives Emulex access to key technology developed by Sierra Logic to make SATA storage systems more reliable, said Arun Taneja, a storage industry analyst at Taneja Group Inc. in Hopkinton, Mass.
Fibre Channel disk drives are used in high-end storage environments, while SATA drives are a lower-cost alternative. But SATA drives are less reliable than Fibre Channel. Sierra Logic's technology makes SATA more reliable, Taneja said.
"Sierra makes a SATA drive look like a Fibre Channel drive but maintains the price advantage of SATA," said Taneja. "Emulex looked at the technology and said, 'It's too important to this industry. I want to own it.'"
Consistent with its integration strategy, Emulex also acquired Arohi Communications, a maker of data center networking and intelligent storage platforms, in May for $39 million.
The Sierra Logic deal is expected to be completed by Sept. 30 and to contribute an incremental $8 million to $10 million in revenue to Emulex in the fourth quarter.
Emulex has about 600 employees worldwide, while Sierra Logic has 70. Smith expects most of them to come to Emulex, including Sierra Logic CEO Bob Whitson.
Sierra Logic, along with Emulex' switch and I/O controller business, will form the Embedded Storage Group, and will be headed by Whitson, the company said.
The remaining Emulex products will be the SAN Connectivity Group, including host bus adapters, blades, multiprotocol routers and storage virtualization, Smith said.