EMC Corporation (EMC) announced the acquisition of DSSD at its annual conference, EMC World, in Las Vegas earlier this month.  The acquisition should help the company improve its flash portfolio by providing new technology for pooling server-based flash which will be used to access Big Data. The financial terms of the acquisition haven't yet been revealed by the company. The acquisition is expected to close later in the quarter.
EMC has had success with its acquisitions in the past. Starting from the VMware (NYSE:VMW) acquisition about a decade ago, the company has since taken over companies such as RSA Security, Data Domain, Isilon, Aveska, Pivotal Labs and XtremIO. All these acquisitions are currently fast-growing and profit-generating businesses within EMC.
We have a $29 price estimate for EMC, which about 10% higher than the current market price.
DSSD: The Secret Chip Maker
Founded in 2010, DSSD worked on building a chip that contains a small amount of processing power with a low number of densely packed storage bits. This architecture helps these chips sustain Big Data workloads. Regular disks often fail to operate efficiently when facing massive workloads or frequent read and write operations. Moreover, regular disks have relatively low durability owing to the formation of bad sectors on the discs and a consequent increase in latency associated with high usage. Where most other storage providers are working on making the standard solid-state storage cheaper and more efficient, often integrating hardware with storage software, DSSD has worked on making use of a new chip technology that uses a non-central indexing and a small bit of processing per chip to reduce latency and increase the durability of storage. 
DSSD has six independent storage-related patents, among them a patent for storage systems with unified address space and multicast direct-memory access (DMA), which uses a unique method to read and access data.  This method is different from that of traditional storage platforms, where a group of storage bits are stored in sequential order, but randomly get spaces assigned within the storage space. When the previously stored data is deleted, a tombstone marker is placed on the deleted spot, which the processor looks for when storing new bits of data. The new data is then partially written on the tombstone space and partially on a random allocation basis. Comparatively, DSSD uses the entire data as a named object entity, where the name of the file gets associated with the content without going through a central index used for storing it. That enables the module to be accessed in parallel without any concern for multiple overwrites, making it faster and easier to scale out. 
Growth In Emerging Storage To Be Aided By DSSD Addition
Over the last few quarters, EMC has witnessed strong growth in emerging storage product sales. The fast-growing emerging storage solutions include network attached storage (Isilon), virtualization and private cloud (VPLEX), cloud storage (Atmos) and the all-flash storage array (XtremIO). Emerging storage product sales rose by 74% year-on-year (y-o-y) in 2013 to $1.5 billion and were responsible for almost 10% of overall storage product sales.  Going forward, the company expects the mix of emerging storage products to continue to increase, with flash-based storage being the key area of focus. According to IDC estimates, the all-flash storage array market is likely to to worth $1.2 billion by 2015. 
EMC's Emerging Technology sub segment continued its impressive run and grew by 81% y-o-y in Q1 2014, with a strong customer response for XtremIO, VMAX, Isilon and Atmos.  As a new entrant, DSSD will function as a standalone unit within EMC's Emerging Technology Products Division.  According to early indications given by EMC's management at the annual conference, the company might launch certain rack space storage products integrated with the DSSD architecture in early 2015. Some of the possible product launches include in-memory databases (GemFire) and real-time analytics tools (integrated with Pivotal HD).
Going forward, we expect emerging storage to continue the strong growth in the coming quarters, with sizable contributions from flash storage products such as XtremIO arrays and the DSSD-based products once they're launched. Although the new technology has yet to be tested when integrated with existing EMC storage architecture, especially on a vast scale, the innovative DSSD technology makes it a favorable bet to drive EMC's flash product sales in the long run.
The company expects its information infrastructure segment (which includes all storage products and associated services) to generate $18 billion in revenues for 2014. Given the industry-wide decline in core storage products revenues, it seems like a difficult task for the storage company to meet its target. However, a sustained growth in emerging storage products could help the company to meet its top line guidance.
Disclosure: No positions.