Western Digital to Acquire sTec

The following is excerpted from an Objective Analysis Alert e-mailed to our clients on 24 June, 2013:

 sTec Stock Price HistoryWestern Digital Corporation (WDC) and sTec, Incorporated announced today an agreement for sTec to be acquired by WDC for $340 million in cash. The HGST subsidiary will assume control of sTec and will continue to support existing sTec products and customers, while also remaining a part of its joint development program with Intel Corp. HGST’s current line of SSDs uses an Intel controller architecture combined with an SAS interface, end-to-end data protection, and other features key to the enterprise SSD marketplace.

Although sTec was a glorious first mover in the SSD business with EMC’s early-2008 introduction of an SSD tier in its Symetrix storage arrays, it lost market share to a growing number of competitors, with enterprise SSD design wins increasingly moving to new entrants.  Prior to the WDC announcement sTec stock was trading at less than 10% of its 2009 peak (see this post’s graphic).

A cloud has fallen over the company from certain stock trades that triggered an SEC investigation of its CEO, and in a recent boardroom battle one key investor was demanding the replacement of management and three board members to set a new direction for the company.

sTec has 55 patents with 78 patents pending, and has excellent NAND flash management technology which should be a good complement to HGST’s leadership in SAS interface technology.

This acquisition is a part of WDC’s SSD strategy which began in 2009 with the acquisition of SiliconSystems, and really became significant with the 2011 acquisition of HGST, giving WDC market dominance in SAS SSDs. sTec brings WDC further enterprise SSD strength from its solid design capabilities and a high-performance product portfolio to boost WDC’s presence in the enterprise SSD market.

The sTec acquisition will solidify WDC’s position in SSDs while potentially giving HGST more control over its SSD architecture. Meanwhile, sTec should be able to regain some of its past glory through the help of its new parent. Both companies’ businesses should improve as a result of this transaction.

Objective Analysis was the first to predict that the enterprise SSD market would become more significant of an opportunity than client SSDs since the barriers to entry are so high yet the market need is so strong. Our report: The Enterprise SSD: Technologies and Markets, details the enterprise SSD market and profiles its players, forecasting unit shipments and revenues over the following five years. The report can be purchased for immediate download from the Objective Analysis website.

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