Wave Systems Corp. (fka WAVXQ)

[Fullmoon]

Storage is storage!


http://www.glgroup.com/News/Storage-is-storage-37490.html

* Western Digital is the number 2 HDD company, after Seagate * WD has weathered the current economic situation better than many companies due to its focus on low cost HDD production
* Western Digital has not made any forays into the solid state storage market until this purchase
* Although Silicon Systems primary market focus is on embedded industrial and military type applications WD should learn a lot about flash products through this acquisition

Analysis
Western Digital announced that the company will acquire Silicon Systems for $65 million. Silicon Systems has a headquarters in Southern California, not too far from where Western Digital is headquartered. Silicon Systems makes solid state drives (SSDs) for the industrial and military market. Their products are used in embedded computing, industrial computers and equipment and military and aviation systems. Silicon Systems offers SSDs with SATA, EIDE, PC card, USB and CF interfaces in 2.5-inch and 1.8-inch form factors.

Western Digital gains some accretive storage business from the purchase but they also get some experienced solid state drive engineers used to working in demanding markets. WD will probably continue to support the current Silicon Systems products but we expect that the company will use this experience to expand into other markets.

In particular we consider it likely that WD will come out with SSD products for the so-called Tier 0 enterprise market. This market appears to be the one where SSD products are showing the most traction and where the higher price per GB of SSDs is off-set by the much faster performance, particularly in reading. In order to do this WD will need to introduce SAS, Fibre Channel and/or PCI express versions of solid state storage products.

In the enterprise market flash products are expanding the Tier 0 market where speed of delivery of content is most critical. The much faster read speed of flash memory compared to HDDs provides a less expensive alternative to volatile DRAM solid state drives and reduces the need to use over-provisioned HDD solutions to get faster data transfers. As shown in Coughlin Associates 2009 Digital Media and Entertainment Storage Report, flash-based SSDs are starting to play a significant role in content delivery systems.

WD’s experience with low cost production should should give them an advantage in the SSD market. It is possible that WD will combine their leadership in enterprise ATA-storage with SSD Tier 0 storage to offer very competitive initial price and operating cost storage components to the enterprise market and perhaps even impact the traditional high performance enterprise HDDs offered by Seagate, Toshiba (formerly Fujitsu) and Hitachi GST.

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.