EMC’s Acquisition of XtremIO Is Flashpoint in New Storage Wars

Why did one of Massachusetts’ biggest companies just spend more than $400 million on an Israeli tech firm with no products and no revenue? It’s all about the flash.

EMC, the Hopkinton, MA-based data storage giant (NYSE:EMC), confirmed it has acquired Israeli flash-storage startup XtremIO in an all-cash transaction. Media reports put the price of the deal at $430 million, though EMC has not confirmed this figure. (The Boston Globe cites 451 Research, a tech analyst group.)

XtremIO is developing flash-array technology to make enterprise servers faster and more efficient at crunching huge amounts of data. (Flash memory is much faster than hard-drive storage, but it’s also more expensive.) The three-year-old company reportedly raised a total of about $25 million from investors including Jerusalem Venture Partners, Giza Venture Capital, Lightspeed Ventures, and Battery Ventures.

Here’s some more context. As my colleague Wade Roush reported in February, EMC was early in selling flash-based storage technology to enterprises, but only recently got into the business of server-side components—in particular, selling flash memory for servers themselves, which has big performance benefits, sort of like an instant memory upgrade (just ask vendors like HP, IBM, and Dell).

Wade’s chat with Pat Gelsinger (see photo above), the president and chief operating officer of EMC’s flagship Information Infrastructure Products division, revealed that EMC authorized a special project called Lightning—based mostly in its Tel Aviv facility (coincidence?)—to develop a flash product for servers, which it unveiled in February. The sequel to that product, called Thunder, is now underway. Interestingly, at the time, Gelsinger gave no hint that EMC would make an acquisition in the sector (though that’s been a consistent growth strategy for the company). Instead he harped on the firm’s internal R&D efforts. “There aren’t that many choices of companies to buy in this space. So what we really did was organic innovation,” Gelsinger said.

Not surprisingly, EMC isn’t saying much yet about how its new acquisition will mesh with its existing efforts in flash. “We fully expect XtremIO technology, once introduced to market, to have a tremendous impact on our customer’s ability to leverage the unique advantages of all-Flash storage across many of their most demanding applications,” Gelsinger said in a statement yesterday.

Look for there to be a run on flash-based tech companies, as servers and data centers struggle to keep up with everyone’s demand for big data.

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