Recently Dell has agreed to acquire EMC for $67 billion and then Western Digital intends to acquire Sandisk for $19 billion. Both EMC and Sandisk made their name due to their storage expertise, although at opposite ends of the spectrum – EMC at the enterprise side of data storage and Sandisk in the client and mobile side. So, why are storage companies the flavor of the season to get acquired?
Other than Sandisk, the three companies mentioned above are going through a slow demand and facing intense competition for their products – be it PCs which is nearing end of life as we know it, legacy storage or mechanical hard drives. Dell with its server expertise combines well with the storage expertise of EMC to make an entity that can take the data center market (read Cloud) flag position – I am going to assume there is going to be some overlap in their storage products which may lead to some consolidation. Also with the advent of Flash as enterprise storage, EMC may not be effective in competing at the price points with their fiber channel arrays. Everyone knows Sandisk from their consumer space but they have made acquisitions in the enterprise space a few years ago which made them have effective solutions across all the computing market segments.
If you look at Flash as a storage (it is actually a solid state device – SSD, storing data using electricity and is non-volatile), they have been more used in the consumer space (embedded applications) in the laptop, cameras, tablet and mobile markets. They are also more rugged as a physical drop of the device that has Flash storage does not lead to a data loss as it may in the case of magnetic drives. Presently their price points are about 5 to 10 times more expensive than the well-known desktop storage – the ‘mechanical’ hard disk. But with volume usually the prices drop, and higher volume is a result of more use cases of the technology – as data centers and cloud are the latest buzz words now, it is clear that enterprise storage class will have to go with Flash and its related array technology as they have no moving parts which results in less acoustic noise, less power consumed and less heat generated, and comes with a thinner profile and are about 100x faster, all a big win for huge data centers being planned as less cooling and less real estate would be required, thus making them ‘more greener’. The biggest drawback today for Flash is they have lesser longevity and old age reliability than the regular hard drives. So, be it public or private cloud, looks like the future holds well with Flash technology.
If you look at the competition for Flash as a storage medium, there are only a handful of them for Sandisk – a combination of Intel and Micron (individually they are leaders in Flash technology and together they have formed a partnership company as well), Samsung and Toshiba. These companies have both the IP related to Flash which they license out and also have end products that they sell directly. Intel, having seen the light at the end of the tunnel for a few years now on their personal computing segment and having gone nowhere in the mobile and tablet business despite their acquisition of Infineon, is a leader in the data center and server farm business, indirectly though (meaning others use Intel’s technology and products to operate their own data centers) and raking in the dollars from this enterprise segment – in fact, this has been their most profitable business now and have customers like Amazon and Microsoft. They do have all the expertise and the IP behind the manufacturing techniques in the sub-micron space which helps them have a generation lead in the Flash technology. Samsung, the world leader in the memory space, is a major Flash supplier to other storage companies and they would like to stay that way given their business model. Then comes Toshiba which is a credible innovator and a technology provider in the Flash space. Actually Toshiba invented both the NOR and NAND based Flash memory technologies, thanks to Dr. Masuoka, NOR considered a more expensive/GB, less durable and slower than NAND in general.
Western Digital and Sandisk combined would offer a lot in the overall storage space across all market segments, and probably may be the biggest supplier to many an enterprise storage companies. Flash can be packaged in different formats for different applications and it is capturing the eyes of chip makers, enterprise storage and server companies, thus potentially leading to more partnerships and mergers in this space in days to come. Enterprise storage is the biggest wave that is happening with the cloud, and big data and analytics segment, and it looks like Flash is getting to be the biggest beneficiary. Expect some strong moves by HP Enterprise, IBM, Hitachi, Netapp, Seagate and Kingston, and even the networking giants in the near future along the M&A space as technology predictors already are pointing to the fact that Flash storage market would exceed the Hard Disk storage market even as early as next year.
This article was written originally in 2014