UPDATED 17:32 EDT / OCTOBER 14 2010

Seagate Going Private – Did They Miss The Solid State Market For Storage

According to Reuters report today, Seagate Technology said that it was approached by another company interested in taking it private. On the going private news Seagate shares surged over 20 percent.

Here is a snippet from Reuters story

The hard drive manufacturer also said it retained Morgan Stanley & Co Inc and Perella Weinberg Partners LP to provide financial advice as it explores the possibility of going private.   Last month, TPG Capital LP and Silver Lake held early stage talks about buying Seagate, but it then appeared unlikely to result in a deal, a source familiar with the situation said at the time.  With market capitalization of about $6 billion today, Seagate is worth less than a third the approximately $20 billion private equity firm Silver Lake Partners paid to take it private for the first time in 2000.  Seagate, the top hard-drive manufacturer by revenue, reentered the public market in 2002.

My Angle

This is bad news for Seagate which had a great run under Bill Watkins as the CEO.  Since Bill Watkins was removed by the board Seagate has struggled.  Many industry insiders are saying that Seagate entered the solid state drive technology trend too late.  These days with cloud going supernova in growth solid state is hottest thing transforming the storage business.

Companies servicing the enterprise with solid state like Fusion.io are doing fantastic in terms of technology and market demand. On the disk side EMC, NetApp, among others are scaling great.  On the consumer front solid state for gadgets continues to do well.

Flash Disk Is The Future

“You have to ask yourself, ‘What would I do if I had a system with terabytes of memory and didn’t have to wait for all the data cached in that memory to get restored after a power outage because the memory held the data all the time?” says David Flynn, CEO of high-growth start-up Fusion-io.

FusionIO CEO was interviewed on Siliconangle.tv at SF VMworld 2010, he told David Vellante, recognized storage and cloud computing expert and co-founder of online consultancy Wikibon.org, that the significant thing about flash today is not that it can become a faster disk drive.

“What’s interesting about flash is that it has 20 times the bit density of RAM and, because it doesn’t require power, 100 times the density in a module, and about 10X the throughput. So it’s not flash as a faster disk drive that has made solid state important, its the fact that flash is a memory device that has made a big change.”

So, for instance, he said, when Answer.com retrofitted its cloud database tier with Fusion-io flash it was able to do a 75% consolidation of its database farm and still get twice the response speed that it had before. And the added bonus is instant recovery from a crash. With conventional memory, of course, all data is lost in a power outage. Once power is restored the database reload has to be staged and the cache “warmed up,” which can take several hours before the system is back online. Because flash holds data when power is off, none of that is necessary — once the power comes back on the system simply “wakes up” and goes back online.

All of this becomes very important for virtualized environments in which large numbers of applications share a physical server and all need their data in memory, and for cloud computing. “What limits the number of virtual servers or desktops you can fit on a single machine is the memory capacity and I/O required,” Flynn said. “Flash …completely removes those constraints.”

Seagate might have missed the market.


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