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LSI accelerates its move into flash

LSI, which left the storage systems business this year, is going full bore into the enterprise flash business.

LSI acquired flash controller chip vendor SandForce for $322 million Wednesday, seven months after it sold off its Engenio storage systems division to NetApp for $480 million. LSI already had an equity stake in SandForce and is one of its customers. SandForce also sells chips to OCZ, Smart Modular, Viking Technology and others.

LSI uses SandForce’s solid-state drive (SSD) chip in its server-based WarpDrive PCIe cards. When the SandForce deal closes – probably in January – LSI will have more control over that technology at a time when server-based PCIe flash will be gaining a lot of attention.

Fusion-io turned its early dominance of PCIe flash for enterprises into a successful IPO, and competitors are lining up to challenge Fusion-io. EMC is among them with its Project Lightning product that is in beta and expected to ship by the end of 2011. Industry sources say EMC will use PCIe cards from Micron and LSI as part of Project Lightning. LSI executives won’t name their OEM customers, but LSI CEO Abhi Talwalkar said Wednesday that he expects a major storage vendor to start selling WarpDrive adapters at the end of this year.

Gary Smerdon, vice president of LSI’s accelerated solutions division, said owning the flash controller chip technology will result in tighter integration of LSI’s flash and management products. The acquisition also guarantees that LSI can keep the flash IP that is already in its products.

“We believe the market for PCIe flash adapters is a rapidly growing market,” Smerdon said. “Now we have a division to specifically focus on the PCIe opportunity. We’re using SandForce’s FSP (flash storage processor), but we didn’t want to talk about a lot of the benefits before because that begs the questions, ‘Where are you getting this from?,’ and ‘What happens if something happens to [SandForce]?’”

LSI executives say they intend to keep SandForce’s customers, too. At least one seems happy to stay onboard for now. After the deal was announced, OCZ CEO Ryan Petersen released a statement saying “SandForce has been a great partner, and we expect the added resources of LSI will only benefit SandForce’s customers. Moreover, because OCZ and SandForce previously contemplated this scenario, we expect that this combination will have no material impact to our existing product lines or business.”

OCZ is SandForce’s largest customer and is responsible for most of SandForce’s revenue, which is expected to be around $60 million this year.

SandForce is the second SSD device startup acquired this year. SanDisk acquired Pliant Technology for $327 million in May.

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