By Scott Denne, Tim Stammers
Disk drive giant Western Digital (NASDAQ:WDC) is making its third - and largest - acquisition of a flash storage company this year, handing over $685m in cash for Virident Systems. The purchase brings the company's total tab on spending in the fast-growing market to more than $1bn.
Earlier this year, Western Digital agreed to pay $340m for flash drive vendor STEC, as well as an undisclosed amount for VeloBit, an early-stage maker of software for boosting the performance of flash drives. That's on top of the $4.25bn it spent in early 2011 on Hitachi Global Storage Technologies, a deal that was driven in part to help Western Digital get into the enterprise flash market.
Virident brings Western Digital PCIe flash cards (essentially flash drives that are used for high-performance applications) and related software. Virident is an early-stage company and Western Digital doesn't expect it to be accretive until 2015. Subscribers to The 451 M&A KnowledgeBase can see our full record and estimates of Virident's revenue.
The sinking cost of flash and rising demand for faster storage is leading to a growing market for enterprise flash at the expense of traditional hard disk. According to TheInfoPro, a service of 451 Research, 17% of IT departments plan to increase their spending on flash memory in servers (Virident's specialty), up from just 8% that planned to do so in 2012.
Western Digital has been far more aggressive than its competition in the flash sector. For instance, SanDisk launched itself into the flash disk market two years ago with the $327m reach for Pliant Technology and, more recently, the $307m pickup of another flash disk provider, SMART Storage Systems. Western Digital's main rival, Seagate, has yet to ink a deal in flash. However, it did make a $40m investment in Virident earlier this year.
Recent deals by disk drive companies
Source: The 451 M&A KnowledgeBase
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.