NetApp CEO Tom Georgens acquired his old company today, when he said NetApp will buy LSI Corp.’s Engenio storage business for $480 million.
No storage acquisition should be considered a surprise these days, and there had been rumblings for months that LSI was looking to sell off Engenio. But the acquirer and the price were a little unexpected. NetApp had shied away from big acquisitions since EMC outbid it for Data Domain in the middle of 2009, and it already has a storage platform that stretches from low end through the enterprise. And $480 million seems like a low price in the wake Hewlett-Packard’s $2.35 billion acquisition of 3PAR, EMC’s $2.25 billion pickup of Isilon and Dell’s $820 acquisition of Compellent in the last six months.
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The deal is expected to close in about 60 days.
NetApp’s management team certainly knows what it is getting. Georgens was Engenio’s CEO for two years before joining NetApp in 2007, and NetApp chief strategy officer Vic Mahadevan went from LSI to NetApp last year.
“At first I was surprised, but recognizing Tom had come from [Engenio], it started making more sense,” Evaluator Group analyst Randy Kerns said. “It makes sense when you consider NetApp got a reasonable price, new market opportunities and OEMs it didn’t have before.”
In a conference call today to discuss the deal, Georgens said Engenio’s systems will allow NetApp to go after different workloads than NetApp’s FAS line. Those workloads include video capture, video surveillance, genomics sequencing and scientific research that Georges characterized as bandwidth intensive.
“There are workloads we’re not going to service with [NetApp] DataOntap,” he said. “This is targeted at workloads that are separate and distinct from OnTap.”
The deal also should strengthen NetApp’s relationship with IBM. LSI sells its Engenio storage exclusively through OEMs, and IBM sells more LSI storage than any other vendor. IBM also sells NetApp’s FAS platform. LSI’s other OEM partners include Oracle,Teradata and Dell. Georgens said NetApp will also sell LSI systems through NetApp channels.
One thing he wants to avoid doing is setting up a competitive situation between FAS and LSI’s platforms. NetApp executives say having one unified platform sets it apart from their major competitors, who sell different platforms in the midrange and enterprise and for NAS and SAN customers.
Georgens said NetApp’s new portfolio will be different than EMC’s situation with its midrange Clariion and enterprise Symmetrix platforms.
“The problem with Symmetrix and Clariion is, the target markets are overlapping,” he said. “They all have replication, snapshots and other things in parallel. This [LSI] is not our SAN product. We have a SAN product called FAS. This is targeted at workloads where we’re not going to sell FAS.”
For more on this deal, see SearchStorage.com