Dot Hill Snares Storage Gear Maker

Storage subsystem maker Dot Hill Systems acquired Chaparral Network Storage on Tuesday for roughly $72.4 million in an attempt to broaden its sphere of influence in the mid-range storage market.

Under terms of the agreement, Dot Hill will pay $62 million in cash and assume $10.4 million in debt for the private company.

Dot Hill takes specifications from large original equipment manufacturers (OEMs) and designs such infrastructure as subsystem boxes, which OEMs then use to put together their own gear. The company also makes storage management software and storage networking software to be used in systems of OEMs that choose not to, or cannot, develop such software themselves.

The company competes with LSI Logic in the lucrative arena for crafting storage equipment for major OEMs like IBM , Teradata, Sun Microsystems , Hitachi Data Systems , and StorageTek .

Longmont, Colo.-based Chaparral makes specialized storage appliances and mid-range RAID controllers and data routers, products that will help Dot Hill bring remote replication, mirroring, and snapshot software features to market much more quickly.

Dot Hill President and CEO Jim Lambert said on a conference call that acquiring Chaparral is a way for Dot Hill to bolster its research and development team and intellectual property en route to gaining market share among mid-range customers.

The deal “will allow Dot Hill to integrate proprietary controller intelligence into our storage solutions and valuable resources to [our] product development team,” Lambert said. “We believe that owning our own controller technology is an important step in remaining competitive and will allow us to more fully control our own destiny.”

In a note, Wall street research firm Adams Harkness said the purchase was important because it removes a key block to the company working more closely with Sun Microsystems, with whom it has a five-year OEM partnership.

The firm said it believes Sun has been hesitant to move forward with Dot Hill as long as the company was purchasing RAID controller technology from a third party, and that acquiring Chaparral should allay such fears.

Durhing the call, Lambert also noted that Chaparral has “an excellent reputation” for providing technology to entertainment, video, and enterprise customers, and that the deal will give customers added functionality and increase product performance once the company’s assets are integrated into Dot Hill’s storage systems.

Carlsbad, Calif.-based Dot Hill reports it will retain Chaparral’s approximately 50 engineers and certain facility support positions at the Longmont location, which will operate as Dot Hill’s Controller Technology Center and regional office.

The transaction is expected to become accretive in the first quarter of 2005, which is when Chaparral and Dot Hill say they’ve scheduled their respective technologies to be integrated. Dot Hill products employing Chaparral technology should appear shortly thereafter.

Story courtesy of Internet News.

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