LSI Acquires SandForce, King of SSD Controllers

LSI Corporation has signed a definitive agreement to acquire SandForce, Inc., provider of flash storage processors for enterprise and client flash solutions and SSDs.

Under the agreement, LSI will pay approximately $322 million in cash, net of cash assumed, and assume approximately $48 million of unvested stock options and restricted shares held by SandForce employees.

SandForce’s products include flash storage processors at the heart of PCIe flash adapters and SSDs. Flash storage processors provide the intelligence required to deliver the performance and low-latency benefits of flash storage in enterprise and client applications. With DuraClass technology, SandForce flash storage processors improve the reliability, endurance and power efficiency of flash-based storage solutions.

The acquisition enhances LSI’s position in the growing server and storage PCIe flash adapter market, where the WarpDrive family of products from LSI already uses SandForce flash storage processors. The complementary combination of LSI’s custom capability and SandForce’s standard product offering propels LSI into a leading position in the growing, high-volume flash storage processor market space for ultrabook, notebook and enterprise SSD and flash solutions.

"Flash-based solutions are critical for accelerating application performance in servers, storage and client devices," said Abhi Talwalkar, LSI president and chief executive officer. "Adding SandForce’s technology to LSI’s broad storage portfolio is consistent with our mission to accelerate storage and networking. The acquisition represents a significant, rapidly growing market opportunity for LSI over the next several years."

Michael Raam, SandForce president and CEO, said: "The combination of SandForce and LSI allows us to deliver differentiated solutions in the PCIe flash adapter segment by tightly integrating flash memory and management. In addition, leveraging our flash storage processors with LSI’s comprehensive IP portfolio and leading-edge silicon design platforms will lead to innovative solutions."

The transaction is expected to close early in the first quarter of 2012 subject to customary closing conditions and regulatory approvals.

Upon closing, the SandForce team will become part of LSI’s newly formed Flash Components Division, with Raam as general manager.

LSI expects the acquisition to be neutral to non-GAAP earnings per share in 2012.

Comments

That's an excellent acquisition for LSI for a relatively high price of $370 million.

Company's cash and short-term investments totaled $879 million at quarter ending October 2, 2011.

SandForce is the king of SSD processor with probably the best SATA controllers and an impressive list of customers that include Adata, AMP, Corsair, Digicube, Edge Tech, G.Skill Phoenix, Kingston, LSI, Mach Xtreme Technology, Mushkin, OCZ Technology, OWC, Patriot, RunCore, Silicon Power, Unigen, Smart Modular Technologies, Solidata, Soligen, Super Talent and Viking Modular Solutions.

On its side, LSI designs SSDs units, enterprise PCIe WharpDrive SLP-300 devices for SLC at 300GB already with SandForce processors, and also 6Gb MegaRAID SATA+SAS controllers as cache in front of SSD arrays. With this portfolio, LSI will better compete with companies like Fusion-io, Intel, OCZ or STEC.

"LSI's engineering investment and focus in SSDs has been more aimed at a custom implementation for those SSD and NAND providers that are using sort of a custom approach for flash storage processors within their SSDs. SandForce has been focused on delivering a complete standard product with all the firmware product ties as well," commented LSI's president and CEO Abhijit Talwalkar.

"We believe that SandForce is on track to generate approximately $60 million of revenue in 2011", added Talwalkar. "The combination of the two companies, I think, absolutely positions us to be a market leader as SSD is for ultrabooks, notebooks and enterprise flash-based solutions grows. (…) We believe the aggregate sort of market, which is composed of flash-based processors for all types of SSDs, as well as the PCIe flash adapter market, is going to be at least $2 billion, and we believe we're very conservative based on what others are saying here in several years and the market in aggregate is growing 40% to 60% annually."

Born in 2006, the start-up SandForce, based in Milpitas, CA, was initially funded by venture capital investors DCM and Storm Ventures and later joined by Translink Capital, and Canaan Partners, getting a total of $76 million. LSI, Adata and United Microelectronics Corp. were also among early investors.