SiliconSystems Feels Solid With $65M Sale
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03/31/2009
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By Scott Denne
3/31/2009
In what may be a solid return for its investors, disk drive maker SiliconSystems Inc. has been sold to Western Digital Corp. for $65 million in cash, giving the hard disk giant its first solid-state product.
SiliconSystems had raised $14 million in venture capital from investors such as Miramar Venture Partners, Rustic Canyon Partners and Shepherd Ventures. It last raised capital in August 2006, with a $2 million Series C round from Samsung Ventures, according to VentureWire records and filings with the Securities and Exchange Commission.
Saints Capital also holds a stake in the company through a recent deal in which the secondary firm bought 20% of Rustic Canyon's position in eight companies from its second fund, including SiliconSystems.
SiliconSystems, founded in 2003, made flash memory-based disks that are used for embedded storage in industrial, military, aerospace and communications products.
The company targeted those markets because it saw larger disk drive companies putting more effort into commodity disk markets, such as corporate data centers and personal computers, said Bob Holmen, a managing director of Miramar Venture Partners, which led the company's Series A round in 2004. "Companies like SanDisk were moving away from the industrial side of the market, and that left SiliconSystems with a nice hole" to fill, he said.
"The key factors for us [in the decision to buy SiliconSystems] was a success in an ongoing market, with customers that are new to us," said Bob Blair, a spokesman for Western Digital. Aliso Viejo, Calif.-based SiliconSystems has been profitable since 2005 and had revenue of $47 million in 2008, he said.
SiliconSystems explored raising more capital to continue to grow independently but concluded that it would need to begin building its own application-specific chips to get to the next level of performance, something that would have taken an additional $25 million and greatly changed the amount of risk involved in the company, said John Babcock, a partner with Rustic Canyon.
Both Holmen and Babcock said they were very happy with the outcome, though neither would provide specific multiples.
In addition to the embedded storage market, SiliconSystems' technology and engineering staff will "enable us to jumpstart our own efforts in solid-state storage," Blair said, adding that Western Digital had plans to eventually bring solid-state products to the consumer and corporate computing markets that it currently serves with hard disk drives.
Flash memory has drifted into the consumer space over the last few years, beginning with devices such as MP3 players and cameras and more recently laptop and desktop hard drives.
There has also been a lot of recent talk - but few products - around bringing flash disks to data centers, since companies frequently have to over-provision hard disks to keep up with faster processor speeds, a problem that flash, with faster read and write speeds, could solve.
On Monday, Pliant Technology Inc. announced a $15 million Series C round to bring enterprise flash disks into production. Also, two of Western Digital's biggest competitors - Hitachi Global Storage Technologies and Seagate Technology - have announced their intention to enter this space.
Integration of the two companies has already begun. Western Digital will keep all of SiliconSystems' approximately 100 employees. The company will become Western Digital's solid-state storage business unit.
http://www.wdc.com
http://www.siliconsystems.com
3/31/2009
In what may be a solid return for its investors, disk drive maker SiliconSystems Inc. has been sold to Western Digital Corp. for $65 million in cash, giving the hard disk giant its first solid-state product.
SiliconSystems had raised $14 million in venture capital from investors such as Miramar Venture Partners, Rustic Canyon Partners and Shepherd Ventures. It last raised capital in August 2006, with a $2 million Series C round from Samsung Ventures, according to VentureWire records and filings with the Securities and Exchange Commission.
Saints Capital also holds a stake in the company through a recent deal in which the secondary firm bought 20% of Rustic Canyon's position in eight companies from its second fund, including SiliconSystems.
SiliconSystems, founded in 2003, made flash memory-based disks that are used for embedded storage in industrial, military, aerospace and communications products.
The company targeted those markets because it saw larger disk drive companies putting more effort into commodity disk markets, such as corporate data centers and personal computers, said Bob Holmen, a managing director of Miramar Venture Partners, which led the company's Series A round in 2004. "Companies like SanDisk were moving away from the industrial side of the market, and that left SiliconSystems with a nice hole" to fill, he said.
"The key factors for us [in the decision to buy SiliconSystems] was a success in an ongoing market, with customers that are new to us," said Bob Blair, a spokesman for Western Digital. Aliso Viejo, Calif.-based SiliconSystems has been profitable since 2005 and had revenue of $47 million in 2008, he said.
SiliconSystems explored raising more capital to continue to grow independently but concluded that it would need to begin building its own application-specific chips to get to the next level of performance, something that would have taken an additional $25 million and greatly changed the amount of risk involved in the company, said John Babcock, a partner with Rustic Canyon.
Both Holmen and Babcock said they were very happy with the outcome, though neither would provide specific multiples.
In addition to the embedded storage market, SiliconSystems' technology and engineering staff will "enable us to jumpstart our own efforts in solid-state storage," Blair said, adding that Western Digital had plans to eventually bring solid-state products to the consumer and corporate computing markets that it currently serves with hard disk drives.
Flash memory has drifted into the consumer space over the last few years, beginning with devices such as MP3 players and cameras and more recently laptop and desktop hard drives.
There has also been a lot of recent talk - but few products - around bringing flash disks to data centers, since companies frequently have to over-provision hard disks to keep up with faster processor speeds, a problem that flash, with faster read and write speeds, could solve.
On Monday, Pliant Technology Inc. announced a $15 million Series C round to bring enterprise flash disks into production. Also, two of Western Digital's biggest competitors - Hitachi Global Storage Technologies and Seagate Technology - have announced their intention to enter this space.
Integration of the two companies has already begun. Western Digital will keep all of SiliconSystems' approximately 100 employees. The company will become Western Digital's solid-state storage business unit.
http://www.wdc.com
http://www.siliconsystems.com