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Dot Hill bolsters subsystems through RAID acquisition

Looking to add midrange features to its storage subsystems, Dot Hill Systems paid more than $60 million to acquire RAID controller specialist Chaparral Network Storage this week.

In an effort to add more midrange features to its storage subsystems and broaden its product line Dot Hill Systems acquired RAID controller specialist Chaparral Tuesday for $62 million.

According to Dot Hill director of marketing Omar Barraza, the acquisition will increase the amount of proprietary technology within the company's storage systems and broaden its product line.

Carlsbad, Calif.-based Dot Hill will keep the engineering personnel and facility support staff at Chaparral's Longmont, Colo., headquarters. This location will operate as Dot Hill's Controller Technology Center and regional office.

"We have been talking to our partners to find out what they need to service their customers. They've asked for a midrange feature set with more data management services," said Barraza,. "That's what prompted us to work with Chaparral."

Barraza added that working closely with Chaparral led to this acquisition. "What drew us to [acquire] Chaparral was the technology that they have."

Dot Hill plans to combine Chaparral's RAID controller technology with its own storage systems, which it hopes will result in different feature sets for a wider range of storage users. Barraza said "the technologies are complementary and will not replace anything Dot Hill already offers."

Enterprise Storage Group research analyst Peter Gerr said the acquisition of Chaparral is a sign of Dot Hill's newly found financial strength. "The majority of Dot Hill's revenues are derived from its OEM relationship with Sun. The Chaparral acquisition is an all cash transaction, showing the Dot Hill has plenty of money in the bank and has a stable enough revenue stream to absorb that level of investment," he said.

According to Gerr, Chaparral has been selling its storage systems into specialized markets like the video and entertainment industries, and has continued to pour research and development dollars into adding features like replication and snapshot to its line of midrange controllers. He said "Dot Hill's decision to buy versus build means quicker time to market for the new features."

"This acquisition fills out Dot Hill's midrange line, giving them a good midrange ATA RAID controller to complement their current SANnet II Fibre Channel and SCSI-based products," added Gerr. "It gives Dot Hill the ability to offer solutions at different price and performance points, and gives them an ATA solution to offer to their OEM and other channel partners."

Dot Hill's economic rollercoaster ride

Dot Hill was one of the hardest hit when the dot-com bubble burst. The slide began in 2001when the company slashed its earnings estimates by millions and was forced to cut costs through a series of layoffs. The downturn seemed to have buried Dot Hill until May 2002 when they struck a key deal with Sun Microsystems. Dot Hill signed an OEM deal to supply Sun with RAID arrays, which Sun now sells as the StorEdge 3000 product family. In return for the partnership, Sun was given a 4.7 percent equity stake in Dot Hill.

As of January 2004 Dot Hill seems to have made a full recovery. The company announced strong earnings and a return to profitability based on the Sun partnership, which accounted for 84% of its sales last quarter.

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