Western Digital said on Monday that its HGST subsidiary agreed to buy troubled SSD maker sTec for $340 million, a deal that would allow HGST to enter the PCIe flash card market using sTec SSD technology.
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HGST expects the sTec deal to close in the third or fourth quarter of the year, pending regulatory review.
While HGST already sells enterprise solid-state drives (SSDs), a Q&A posted on its website about the deal said sTec's engineering expertise and intellectual property will complement HGST's own technical capabilities.
HGST and sTec both sell Serial-Attached SCSI (SAS) and Fibre Channel SSD drives. STec also has SATA SSD drives, PCIe cards and cache acceleration software.
Formerly known as Hitachi Global Storage Technologies, HGST was acquired by Western Digital for $4.3 billion in early 2012.
Jim Handy, semiconductor analyst for Objective Analysis, said that while there is overlap in the product lines, sTec owns SSD technology that HGST lacks.
"The current Hitachi SSD drive uses an Intel controller that is getting long in the tooth," Handy said. "STec doesn't have the SAS understanding that Hitachi has, but sTec is really good at managing flash. There's a lot of sTec technology that Hitachi can use to improve the quality of its controllers."
While buying sTec's SSD technology, Western Digital hopes to leave sTec's troubles behind. Unhappy shareholders were pushing sTec to make changes on its board, including dumping CEO Manouch Moshayedi. Moshayedi became CEO in 2012 after the Securities and Exchange Commission (SEC) began investigating his brother Mark for insider trading, prompting Mark Moshayedi to give up the CEO post.
The Western Digital FAQ said neither of the Moshayedis will have a long-term role with the company, but will be involved during the transition period.
STec was an early OEM supplier for major storage vendors. EMC, IBM and Hitachi Data Systems sold sTec SSDs when they began selling flash in enterprise storage arrays in 2008, making sTec the early market leader. But rivals caught up with sTec's SSD technology, and the storage vendors moved to flash products from other sources. STec revenue fell from $308 million in 2011 to $168.3 million in 2012, and it lost $25.5 million in the first quarter of 2013. The declines prompted sTec to shift from its OEM model to selling directly to enterprises and through value-added resellers. Earlier this month, sTec launched its first all-flash array, the s3000, based on Microsoft Windows Storage Server 2012.
Handy said sTec's recent go-to-market strategy becomes moot with the acquisition.
"I can't imagine Western Digital would have a reason to hang on to any of sTec's sales and marketing strategies," he said. "They'll continue to follow the Western Digital strategy, and that's a strong sales channel for OEMs and end users."
The Western Digital FAQ said the vendor isn't finished with acquisitions. "[Western Digital] is focused on executing our growth strategy and capitalizing on the many opportunities within the storage industry," it said, mentioning cloud storage and solid-state storage as high-growth areas.