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WD Continues to Invest Heavily in Enterprise SSDs

Subsidiary HGST just acquires Virident for as much as $685 million in cash.
This is a Press Release edited by StorageNewsletter.com on 2013.09.10

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Western Digital Corp. and Virident Systems, Inc. entered into a definitive merger agreement under which Virident, a provider of server-side flash storage solutions, will be acquired by HGST, a wholly-owned subsidiary of Western Digital.

Virident will be acquired for approximately $685 million in cash. This represents approximately $645 million in enterprise value, net of Virident's estimated cash balance at closing.

Virident is a in the growing segment of enterprise and cloud computing. Its solutions enable enterprises to tackle performance-intensive datacenter applications with PCIe-based enterprise flash storage solutions for virtualization, database, cloud computing, and webscale applications. Virident's FlashMAX II can be installed in any server and provides high capacity in a single low-profile card, enabling organizations to maximize the use of valuable datacenter space, reduce datacenter sprawl and provide performance. In addition, FlashMAX Connect is a software suite to deliver a shared server-side flash storage tier with enterprise reliability.

The pending acquisition extends HGST's presence in enterprise SSDs, which IDC predicts will grow from $2.5B in revenue in 2012 to $7B in revenue by 20171. The acquisition further enhances the value of HGST solutions through Virident's intelligent storage software. The integration with HGST will enable Virident to accelerate its go-to-market efforts by leveraging HGST's brand, channel relationships, and global customer reach.

Virident CEO Mike Gustafson will upon closing join HGST as a SVP leading the Virident team
. He has more than 20 years of experience in the storage, server, networking systems and IT industries, will report to HGST president Mike Cordano.

"We have established a competitive position in the enterprise SSD space and with our recently announced acquisitions we are increasing our commitment to become an even more significant player in this high growth segment," said Steve Milligan, president and CEO, Western Digital. "Virident has a proven leadership team and a culture of innovation. Its combination of great people, leading products and advanced technology will enhance our increasingly strategic position in enterprise storage."

"The Virident acquisition is a continuation of HGST's strategy to address customers' rapidly changing storage needs by delivering intelligent storage devices that tightly integrate hardware and software to maximize solution performance," said Cordano. "Virident's server-side flash storage helps datacenter customers solve their most significant data infrastructure challenges, including application performance across diverse workloads, power efficiency, and TCO. We welcome the Virident team to HGST and look forward to further accelerating their momentum."

"The Virident vision is centered on leading the flash platform transformation. This includes advancing adoption of server-side flash storage, software and solutions in next-generation datacenters. Bringing technology leadership and substantial business advantage to customers is our mission and drives our team every day," said Gustafson. "I want to recognize and thank our employees and founders for the combination of vision and execution. We are excited to join HGST and accelerate the growth of our business, partnerships and value."

RBC Capital Markets has acted as the financial advisor to Western Digital and Bank of America Merrill Lynch as financial advisor to Virident in connection with this transaction.

Closing of the acquisition, which is subject to customary conditions, is expected to occur in 4Q2013.

Our Comments

$685 million - and in cash only - is the highest price never paid this year for an acquisition in the worldwide storage industry, after $307 million paid by SanDisk to get also an SSD company, SMART Storage Systems. Last year, the record was $2,500 million by Micron Technology to acquire Elpida.

It's also the fifth acquisition of WD in SSD after SiliconSystems in 2009, HGST (partly in SSD) in 2011, sTec and Velobit this year (see below), and its third acquisition this year (Arkeia, Velobit, Virident). WD has spent already more that $1 billion into SSD and is currently the most aggressive company in the sector with SanDisk who acquired four companies in this field the last two years.

Based in Milpitas, CA, and also in Karnataka, India, Virident got $116 million in financial founding through several rounds being backed by strategic investors Intel, Cisco Systems, Seagate and an unknown storage solutions provider, as well as Hercules Technology Growth Capital and venture investors Artiman Ventures, Sequoia Capital, Globespan Capital Partners, and Mitsui Global Investments. This means that $685 million is a great benefit for Virident's shareholders.

Replacing co-founder Kumar Ganapathy just one year ago, Virident's chairman and CEO is Mike Gustafson who served as president and CEO of BlueArc Corporation from 2005 until the acquisition of the company in September 2011 by HDS.

But if there was a company supposed to acquire Virident, it was not Western Digital, but Seagate - with no acquisition at all in flash drives as far as we know - that puts $40 million in the start-up in 2013 and is an OEM of Virident. You can presume that Seagate will progressively stop this relationship, not to be obliged to buy products coming from its main HDD competitor, but it does not have any other PCIe SSD offering.

Virident is in high-end PCIe SSD only since its inception in 2006, now with three products:
  • FlashMAX II PCIe offered since last year are SSDs in both MLC at up to 1.1TB or SLC at up 2.2TB and 1.5 million IO/s.
  • FlashMAX Connect software, based on FlashMAX II, scales up from 0.5TB to 24TB of flash per server. It will be able to manage new interfaces NVMe and SOP.
  • vFAS (Virident Flash management with Adaptive Scheduler) software virtualizes with FlashMAX underlying flash to provide quick path to application data without any change to the application.
Like sTec - also in PCIe SSDs - and Velobit, Virident will be incorporated into HGST at the forefront of enterprise SSDs for the group now with one of the largest portfolio of flash drives.

           Acquisitions of Western Digital in SSD
Year Company
Price*
Activity of acquired company
2099
SiliconSystems    65 SSDs for embedded systems
2011
Hitachi GST  4,800 HDD manufacturer;
also in SSD;
deal closed in March 2012
2013
sTec   340 SSDs
2013
Velobit    NA Caching software for SSD
2013
Virident
  685 PCIe SSDs
 * In $ million


Read also:
Virident Completed $21 Million Series C
$50 million to date in equity funding
Seagate Updates Entire SSD Portfolio
6Gb SATA up to 480GB, 12Gb SAS up to 800GB, in PCIe with Virident
Seagate Invests $40 Million in Virident Plus OEM Partnership
To get PCIe SSDs
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