NetApp Is Buying SolidFire for $870 Million

CA: NetApp Headquarters
A sign on the headquarters campus of NetApp in Sunnyvale, California on January 1, 2014. Photo Credit: Kristoffer Tripplaar/ Sipa USA
Photograph by Kris Tripplaar — Sipa USA/AP

If you don’t like the state of the data storage market these days, wait a second, it may change.

The latest example of this is NetApp’s (NTAP) purchase of SolidFire for $870 million in cash. CRN, which has been monitoring the story closely, had expected the deal to come in somewhat higher, at $1.2 billion. The web site also said Cisco (CSCO) and Samsung (SSNLF) were in the hunt to land the Boulder, Colo. flash storage startup.

In the context of the mergers-and-acquisitions transforming the storage market, the purchase certainly makes sense. By buying SolidFire, NetApp now better competes with players like Pure Storage and EMC (EMC), which acquired XtremIO and ScaleIO to strengthen its flash capabilities. And with EMC and its protégé VMware (VMW) as a part of a humongous, planned $67 billion acquisition by Dell, the landscape will continue to transform.

WATCH: For more reaction to the Dell-EMC merger, watch this Fortune video.

Technologically, the industry is also going through changes. Prior to the recent acquisitions, traditional, spinning-disk-based storage providers like NetApp and EMC had to contend against solid-state and flash-based competitors like Pure Storage and SolidFire, which offered faster and more expensive state of the art solutions. Similarly, spinning disks are faster and more expensive than tape drives, which they dethroned years ago.

But not every piece of data requires lightning-fast access times, which is why many companies employ a tiered storage system that encompasses all three technologies. Big companies are looking to put their most important, critical data onto the fast flash drives and store less critical information on less expensive spinning media, said Patrick Moorhead, founder and president of Moor Insights & Strategy, an Austin, Texas research firm. “NetApp needs better flash arrays, and this is where SolidFire comes into play,” he said via email. “It’s as simple as that.”

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Longer term, the storage industry players will also need to worry about public cloud providers like Amazon (AMZN) Web Services, Google (GOOG) Cloud Platform and Microsoft (MSFT) Azure. Businesses are starting to view these services as reputable repositories for corporate data.

MORE: NetApp was one of Fortune’s 100 best companies to work for in 2015: NetApp

None of the big cloud storage outfits are likely buying a ton of high-end, name-brand storage gear for their needs. That’s one reason the physical storage companies are all repositioning themselves as something more than storage specialists. NetApp CEO George Kurian, for example, now calls NetApp a “data management” provider that works with customer data, whether it resides on-premises, in a third-party data center, or on Amazon or Microsoft’s cloud.

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