LSI Announces Agreement to Acquire SandForce

Update 10/27 - 2:30 PM:  We just had a conference call and interview with LSI VP and GM, Gary Smerdon on this announcement and what it means to SandForce customers and LSI moving forward.  More details are available in that coverage.

News broke earlier today that LSI Corporation, maker of enterprise-class storage solutions, has entered an agreement to acquire solid state storage processor manufacturer SandForce. According to the terms of the agreement, LSI will pony up approximately $322 million in cash, net of cash assumed, and assume approximately $48 million of unvested stock options and restricted shares held by SandForce employees. SandForce’s storage processors have proven to be popular in the consumer space, but products like OCZ’s recently released Z-Drive R4 also show that SandForce’s processors are well suited to high-performance enterprise-class applications as well. This move by LSI obviously bolsters the company’s resources, but it also seems to be a good match in our opinion. LSI has long been a player in enterprise storage and SandForce’s products have been very strong the consumer space for the last couple of years. The combined resources of the two companies has the potential to yield some exciting products in both markets.

Over 30 Companies, Including OCZ, Offer Solid State Drives Based on SandForce's Controllers

What the acquisition means to SandForce’s partners in the long-terms isn’t clear just yet, but OCZ CEO Ryan Petersen was quick to comment on the matter. "On behalf of OCZ, I would like to congratulate SandForce on its combination with LSI, a current partner of OCZ's. SandForce has been a great partner, and we expect the added resources of LSI will only benefit SandForce's customers. Moreover, because OCZ and SandForce previously contemplated this scenario, we expect that this combination will have no material impact to our existing product lines or business." It appears that, for now at least, fans of SandForce-based drives from OCZ and other manufacturers need not worry that LSI with alter any existing agreements.

More information on the LSI’s acquisition of SandForce is available in the full press release, posted below...

LSI Announces Agreement to Acquire SandForce

Acquisition of leading provider of flash storage processors extends LSI's industry-leading position and breadth in storage technology solutions

MILPITAS, Calif., October 26, 2011 – LSI Corporation (NYSE: LSI) today announced that it has signed a definitive agreement to acquire SandForce, Inc., the leading provider of flash storage processors for enterprise and client flash solutions and solid state drives (SSDs). Under the agreement, LSI will pay approximately $322 million in cash, net of cash assumed, and assume approximately $48 million of unvested stock options and restricted shares held by SandForce employees.

SandForce’s award-winning products include flash storage processors at the heart of PCIe flash adapters and SSDs. Flash storage processors provide the intelligence required to deliver the performance and low-latency benefits of flash storage in enterprise and client applications. With market-proven, differentiated DuraClass™ technology, SandForce flash storage processors improve the reliability, endurance and power efficiency of flash-based storage solutions.

The acquisition greatly enhances LSI's competitive position in the fast-growing server and storage PCIe flash adapter market, where the WarpDrive™ family of products from LSI already uses SandForce flash storage processors. The complementary combination of LSI’s custom capability and SandForce’s standard product offering propels LSI into an industry-leading position in the rapidly growing, high-volume flash storage processor market space for ultrabook, notebook and enterprise SSD and flash solutions.

“Flash-based solutions are critical for accelerating application performance in servers, storage and client devices,” said Abhi Talwalkar, LSI president and chief executive officer. “Adding SandForce’s technology to LSI’s broad storage portfolio is consistent with our mission to accelerate storage and networking. The acquisition represents a significant, rapidly growing market opportunity for LSI over the next several years.”

Michael Raam, SandForce president and CEO, said, “The combination of SandForce and LSI allows us to deliver differentiated solutions in the PCIe flash adapter segment by tightly integrating flash memory and management. In addition, leveraging our flash storage processors with LSI’s comprehensive IP portfolio and leading-edge silicon design platforms will lead to innovative solutions.”

The transaction is expected to close early in the first quarter of 2012 subject to customary closing conditions and regulatory approvals. Upon closing, the SandForce team will become part of LSI’s newly formed Flash Components Division, with Raam as general manager.

LSI expects the acquisition to be neutral to non-GAAP* earnings per share in 2012. The company will provide further details during its conference call at 2 p.m. PDT today and discuss third quarter results and the fourth quarter 2011 business outlook.

* GAAP refers to Generally Accepted Accounting Principles. Non-GAAP earnings exclude goodwill and other intangible asset impairment, stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, and gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above-mentioned items.