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By | Simon Sharwood 19th August 2015 02:56

Seagate scoops Dot Hill for US$694 million

Disk giant wants in on cloud-scale storage rigs and pays a premium for its market entry

Seagate has announced it will acquire storage outfit Dot Hill for US$694 million.

The canned statement announcing the deal says “Dot Hill’s external storage array-based systems and software products will complement and expand Seagate’s storage systems offerings and be offered as part of Seagate’s Cloud Systems and Electronics Solutions business. Seagate will leverage Dot Hill’s storage technology IP portfolio and software capabilities to drive innovation and provide incremental value to their combined OEM customer base.”

Seagate's happily paying a 50% premium over the preceding three month stock price average to get its hands on Dot Hill.

Little wonder the target company's board has unanimously agreed to the transaction.

It's not hard to see why – the company's been struggling to contain its administrative expenses and has posted years of meagre profits. Becoming part of the far larger Seagate will likely mean Dot Hill's back office is subsumed into its new owner's, where hopefully economies of scale will mean admin costs dip. Dot Hill does around $240m of revenue a year, a cash trickle that shouldn't trouble the systems managing Seagate's ~$14 billion annual take.

Owning Dot Hill gives Seagate the chance to sell its chassis to OEMs and to make sure that they're packed full of its disks and flash when they leave the factory. It also gives the storage giant the chance to head off storage companies as they adapt their wares for cloudy uses. The EMC Federation is already heading in that direction with the forthcoming EVO:RACK and VxRack products that will take EMC storage into cloudier use cases. HP and Dell are also keen to show they can scale to any size, while also dropping costs to suit hyperscale operators thin margins. Taiwan's and China's big OEMs are also getting ready to sell direct to bit barn operators.

Seagate having a waft at that market as it forms therefore makes sense. Whether Dot Hill is quite the vehicle to get it there, given its modest success to date, remains to be seen. ®

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