has decided to send its chips and storage products in different directions.
The Milpitas, Calif.-based company will separate its storage systems operations from its semiconductor business and create an independent storage systems company. The independent company will be based upon LSI Logic’s subsidiary, LSI Logic Storage Systems, which is currently reported as a separate segment in LSI Logic’s financial statements. LSI anticipates taking the storage company to an initial public offering (IPO) next year.
LSI Logic Corp. makes communications, consumer, and storage semiconductors for applications that access, interconnect, and store data, voice, and video.
The pending spin-off, LSI Logic Storage Systems Inc., designs and manufactures modular enterprise storage platforms and storage management software that are delivered to end users through strategic partners such as IBM, StorageTek, the Teradata Division of NCR, and SGI.
These include combinations of hardware, software, and services for applications such as transaction processing, e-mail, data warehousing, and scientific research. Modular storage systems — those that can be compartmentalized to scale up or down depending on existing data requirements — have been gaining popularity over the last few years, along with software to manage the data.
But the move is bold on a number of levels. The company is entering a market that is not only already congested with competition from major systems vendors such as EMC
, and a number of smaller players, but one that has also undergone a number of evolutionary shifts.
Due to existing and pending compliance regulations from the federal government, many customers are asking their storage vendors for the ability to store huge amounts of data and manage its flow as well. This requires a blend of content management with storage management, which the industry has taken to calling information lifecycle management (ILM), or cradle to grave data management.
But the move may also underscore the resurgence of the storage systems industry, which has taken a beating over the last few years in a soft economy. However, by analyst and vendor accounts the data storage sector has improved markedly in the wake of recent synthetic and natural catastrophes. Uncertainty created by the recent war on terrorism and blackouts in the U.S. have led customers to think more seriously about investing in systems they believe will back up and restore their crucial data in the event of a disaster.
According to LSI Logic’s Form 10-Q for the third quarter of 2003, the storage systems subsidiary’s revenues were $104 million, or 23 percent of the $450 million total reported by LSI Logic. In a public statement, LSI Logic Chairman and Chief Executive Officer Wilfred Corrigan said the intent is to create a company that “unlocks the value and potential of our storage systems business.”
“We anticipate that a separation will intensify the market focus and strategic direction of the two companies, benefiting customers, investors, and employees. The net result will be two companies, one focused on semiconductors and the other on storage systems,” Corrigan said.
LSI Logic’s board of directors has authorized management to proceed with the separation. Depending on market conditions, LSI Logic is considering an initial public offering (IPO) for the storage systems company in the first half of 2004. At a later date following the IPO, LSI Logic may distribute to its stockholders the remaining shares of the storage systems business in a tax-free transaction or sell or hold any portion of the shares.
Tom Georgens, who has served as the president of LSI Logic’s Storage Systems subsidiary for the past five years, will be the chief executive officer of the storage systems company. The current executive team that made the subsidiary a success will remain in place.
“We have expanded and strengthened our customer relations and strategic partnerships,” said Georgens in a statement. “Based on the global trend toward modular, scalable storage systems and LSI Logic Storage Systems’ proven partnership model, we can provide best-in-class solutions to end-market customers.”
Story courtesy of Internet News.
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