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Fusion-io picks up SSD caching startup IO Turbine

Fusion-io just completed it’s first quarter as a public company, and already its acting like a grown-up vendor. The PCI-based solid state storage vendor today acquired caching software startup IO Turbine for around $95 million.

The deal comes as competition heats up for Fusion-io from other flash vendors. STEC today brought out its first Kronos PCIe SSD card as well as its EnhanceIO SSD Cache Software. And OCZ Technology Group Wednesday upgraded its Z-Drive PCIe SSD card.

IO Turbine, which had $8 million in venture funding, came out of stealth in May with Accelio software designed to help mitigate IO performance latency problems in VMware environments by offloading IOPS from primary storage to flash. The software works with virtual machines that use locally attached solid-state storage or flash. Accelio installs on VMware servers, identifies the highest-priority data and offloads IOPS from primary storage to flash.

Accelio software is still in beta, but Fusion-io CEO David Flynn said his company tested the IO Turbine software with its own products at customer sites and was happy with the results. He said Fusion-io will integrate IO Turbine software with its ioMemory Virtual Storage Layer (VSL) software that virtualizes memory and storage. Fusion-io has a DirectCache software plug-in for ioMemory VSL but that does not focus on virtual machines.

Flynn said the ability to deal with VMs is crucial to his product line.

“We’re talking storage from the mainframe area of big proprietary centralized systems to the virtual era,” he said on a conference call to discuss the acquisition and Fusion-io’s earnings. “We do with data what VMware does with compute.”

There have already been three major acquisitions and mergers involving vendors that produce SSDs and hard drives since March. Western Digital said it will acquire hard drive and SSD vendor Hitachi Global Storage Technologies (HGST) for $4.3 billion, SanDisk acquired SSD vendor Pliant Technology for $327 million, and Seagate and Samsung formalized a strategic alliance involving Seagate’s NAND flash.

Storage Strategies Now analyst James Bagley said he expects to see more deals.

“This is further evidence that consolidation is coming,” SSN analyst Jim Bagley said. “All the SSD vendors out there won’t survive, but clearly the ones that have a good story are getting bought.”
Bagley said IO Turbine helps Fusion-io’s software story, but he said it doesn’t solve what he sees its biggest problem — increased competition from newer products such as those from Micron, Texas Memory Systems and STEC that offload the flash management from the CPU.

“Fusion-io’s hardware is getting long in the tooth,” Bagley said. “Having the server do all of the flash management is not a good idea.”

Flynn said he’s not concerned with the increasing competition or his company’s products. He claims Fusion-io’s biggest advantage is the reliability of its devices. He also said competitors focus on IOPS while Fusion-io concentrates on bandwidth and latency optimization.

“Nobody has really been able to compete with us on performance metrics that ultimately matter for accelerating applications,” he said. “It’s easy to make IOPS look good by putting eight SandForce controllers on a RAID controller and say, ‘Look at all the IOPS we have.’ But aggregation of SSDs on a card is problematic for reliability. What matters more is how the software is integrated with the operating system.”

Fusion-io’s first quarter as a public company was successful. The company raised $218.9 million in an IPO last June, and it said today that it slightly beat expectations with $71.7 million in revenue and $5.8 million of net income last quarter. That compares to $10.9 million revenue and a loss of $11.9 million a year ago. Its revenue in the previous quarter was $67.3 million.

Facebook and Apple remain Fusion-io’s largest customers. Flynn said they both accounted for more than 10% of the vendor’s revenue for the quarter, but he didn’t say exactly how much of Fusion-io’s products they bought.

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