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Cavium pays $1 billion for QLogic, storage

After months of shopping itself, storage networking vendor QLogic has a buyer.

Networking semiconductor vendor Wednesday said it will pay $1 billion for the FC and Ethernet adapter company in a deal expected to close in the third quarter of 2016. The deal adds to the evidence that storage networking is a best fit as part of a larger Ethernet-dominated networking company.

Cisco kicked off the trend of combining networking and storage when the Ethernet giant stared selling Fibre Channel SAN switches in 2003. The FC connectivity market has seen a great deal of consolidation since then, with FC vendors either going away or joining forces with Ethernet companies.

Avago Technologies acquired QLogic rival Emulex for $606 million in 2015. That deal was sandwiched between Avago’s purchases of storage and networking chip firm LSI and networking connectivity vendor Broadcom.

Brocade, which began as a Fibre Channel switch company, moved into Ethernet network switching with a $2.6 billion acquisition of Foundry Networks in 2008. FC remains the bulk of Brocade’s business, but the vendor also added wireless networking vendor Ruckus for $1.2 billion in April to make it a broader enterprise play.

Now we have the two FC switch vendors Brocade and Cisco and the two main FC adapter providers QLogic and Emulex selling storage as part of larger networking companies.

Cavium is a player in the networking, communications and cloud markets but will use QLogic to fill one gap in its product line.

“Storage has been one of the areas that has been an aspirational market for us,” Cavium CEO Syed Ali said Wednesday evening on a webcast to discuss the QLogic deal. “We never had penetration into the mainstream storage market.”

Ali said owning QLogic can help Cavium push its own products such as its ThunderX data center and cloud processor into deals with storage vendors such as EMC and NetApp.  It also gives Cavium an instant storage software stack.

“QLogic has an extensive software stack that we don’t have for the mainstream market,” he said. “That software stack takes years to build out.”

Ali said Cavium will kill QLogic legacy products such as its FC switches because “it’s not a great idea for a silicon company to also be a switch company” but he said he is bullish on QLogic’s FC adapters. He pointed to the ongoing transition from 8 Gb per second FC to 16 Gbps and the move to 32 Gbps expected in 2017-18 and the rise of all-flash arrays as drivers of FC business. He said all-flash arrays have a 70% to 80% FC attach rate.

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