QLogic Eyes SilverStorm

QLogic is closing in on its second InfiniBand acquisition of the year, with switch vendor SilverStorm in its crosshairs, according to industry sources.

For now, neither side is confirming the deal. QLogic marketing VP Frank Berry declined to comment, and SilverStorm CEO Russ Hawkins denied a sale is in the works, saying, "It's news to me, and I think I would know."

But sources close to the companies say QLogic has signed a term sheet to acquire the King of Prussia, Pa.-based private company for around $60 million in a cash transaction.

SilverStorm sells InfiniBand directors, switches, and host channel adapters (HCAs) -- the InfiniBand equivalent of HBAs -- as well as software to implement, manage, and provision InfiniBand gear.

SilverStorm, which changed its name from InfiniCon in May 2005, has about 90 employees and has raised $68 million in funding, with its latest round bringing $13 million in January. (See SilverStorm Gathers Cash.) The company has OEM deals with IBM, Fujitsu, and other server vendors and supplies director switches to InfiniBand rival Cisco. Its customers include the U.S. Department of Defense, NASA, Sandia National Laboratories, Virginia Tech University, Toyota, Lockheed Martin, and Chevron.Although primarily a Fibre Channel HBA vendor, QLogic dipped its toes into InfiniBand in February when it acquired chip maker PathScale for $109 million. (See QLogic Bets on InfiniBand.)

With SilversStorm's InfiniBand devices and software along with the chips from PathScale, QLogic could conceivably become a major player in the high-speed interconnect space. SilverStorm is among the leading InfiniBand device vendors, along with Cisco and Voltaire. On the InfiniBand chip front, QLogic competes with market leader Mellanox. (See Will Mellanox Make IPO Move?.)

"This gives QLogic InfiniBand software and systems, and they can marry it with the silicon IP they got from PathScale," says a source with knowledge of the SilverStorm deal.

Buying SilverStorm could also give QLogic a closer relationship with Cisco, which acquired its own InfiniBand products with a $250 million purchase of Topspin in April 2005. (See Cisco Takes On Topspin.) Cisco buys its InfiniBand directors through an OEM deal with SilverStorm, while putting its development efforts into the Frame virtualization software it got from Topspin. (See Cisco Topspins Into Virtualization.) If that arrangement continues, QLogic would have OEM deals with Cisco for Fibre Channel switches and InfiniBand directors.

Hawkins says SilverStorm revenues "have grown considerably" the past few quarters but won't say how close the company is to profitability. "We're still a developmental stage company," he says.QLogic and its major Fibre Channel HBA rival Emulex have been moving to diversify their product offerings. Emulex picked up storage switch startup Aarohi in April and Tuesday said it intends to acquire Fibre Channel-to-SATA bridge startup Sierra Logic for $180 million. (See Emulex Secures Sierra Logic and Emulex Buys Aarohi.)

"I would not be surprised," a Wall Street analyst says of the marriage of QLogic and SilverStorm. "Both Emulex and QLogic realize that the Fibre Channel market is going to shrink, maybe starting in 2007. They need to expand into adjacent technologies within the data center, and that's what they are doing."

Although primarily used in high performance computing (HPC), InfiniBand has also been creeping into storage systems over the past year. Isilon offers Cisco InfiniBand switches with its NAS systems, and DataDirect and LSI started shipping native InfiniBand about a year ago. (See Isilon Embraces InfiniBand and InfiniBand Natives Stirring.)

Dave Raffo, News Editor, Byte and Switch