Silicon Motion Acquiring China’s Shannon Systems for $57 Million

Silicon Motion Technology Corporation, in NAND flash controllers for SSD devices, has entered into a definitive agreement to acquire Shannon Systems, supplier of enterprise PCIe SSD and storage array solutions to China’s Internet and other industries.

Under the terms of the agreement, Silicon Motion will acquire Shannon for a total purchase price of $57.5 million, which includes a combination of cash, equity and contingency payments.

The transaction has been approved by the boards of directors of both companies, is subject to customary closing conditions, including regulatory review and approval, and it is expected to close by the end of July 2015.

“China has become the largest internet market in the world and its internet companies have already widely adopted SSDs for their data centers and hyperscale servers. More recently, Chinese corporates and government organizations have started using SSDs for data virtualization. These operators of corporate and internet infrastructure have increasingly been turning to Shannon for world-class, locally developed and supported SSD solutions,” said Wallace Kou, president and CEO, Silicon Motion. “Shannon was co-founded by Dr. Xueshi Yang, Marvell’s previous SSD controller architect and a Seagate veteran, with a mission of developing innovative and competitive enterprise SSD solutions in China. I am excited that upon closing, Xueshi will be joining Silicon Motion’s executive team to continue spearheading enterprise SSD activities.”

Xueshi added: “By joining the world’s leading merchant controller company and combining their extensive NAND flash controller expertise and overall corporate resources with our deep understanding of enterprise SSD systems and the Chinese storage market, we believe we can grow our R&D and sales infrastructure faster than we could before and accelerate the business momentum of Shannon’ SSDs and flash storage arrays. We look forward to joining the Silicon Motion team.”

In 2014, Shannon launched a 6.4TB PCIe SSD with low access latency and a power envelope of less than 25W. More recently, it introduced PCIe-RAID technology, a flash array solution that offers enterprise customers performance and HA. The company has expanded its customer base to more than 80 companies and count China’s Internet companies in e-commerce, on-line travel, and mobile security as customers. In 2015, it expects to scale sales to approximately $14 to $18 million.

The impact of this acquisition is expected to be slightly accretive to Silicon Motion’s non-GAAP earnings per share in the second half of 2015 and more accretive in full-year 2016.

Shannon Systems is the operating identity and brand of Shanghai Baocun Information Technology Co., Ltd. It is headquartered in Shanghai. Beijing, Shenzhen and Chongqing have sales and support center. Core team is formed by Silicon Valley veterans with over 150 combined patents in the management of NAND flash and solid state storage solutions and architecture.