Adaptec, IBM Get Cozier

Adaptec Inc. (Nasdaq: ADPT) is getting bigger as it deepens its relationship with IBM Corp. (NYSE: IBM).

Adaptec said late Tuesday that it acquired an IBM business unit and expanded an OEM deal to provide RAID controllers for Big Blue's servers (see IBM RAIDs Adaptec Controllers). And there might be another deal coming between the two.

Last April, Adaptec announced an expanded relationship with a Tier 1 OEM (see Adaptec Posts Q4 Profit). At the time, Adaptec executives gave cloudy forecasts placing the deals value at as much as $20 million in revenue in 2005 and $50 million in 2006. So is this latest announcement the deal that Adaptec discussed in April?

"No," says Ahmet Houssein, VP of Adaptec’s Storage Solutions Group. "We have one more coming. We will announce that shortly.”

Houssein estimates the RAID controller agreement will generate approximately $150 million in revenue over the next three years. However, he won’t say how much Adaptec will pay to acquire the IBM business unit -- which includes intellectual property, licenses, and personnel. Adaptec promises financial details when it reports its earnings July 29.The partnership on RAID technology with IBM goes back to a March 2002 licensing and supply agreement (see Adaptec, IBM Ink $200M RAID Deal). IBM granted Adaptec the right to use its ServeRAID technology, and Adaptec supplied software, firmware, and hardware for IBM’s Intel-based xSeries server. The new deal expands the arrangement to include IBM’s Unix-based pSeries and midrange iSeries of servers.

As for the deal that Adaptec won’t reveal, it would be no surprise if IBM is the other party there, too. IBM already generates more revenue for Adaptec than any other reseller partner. Like other major SAN system companies, IBM is expected to jump into the iSCSI market late this year, and Adaptec is among the early iSCSI market leaders (see ISCSI Shakin' Goin' On). Several analysts also mention Dell Computer Corp. (Nasdaq: DELL) as a possible iSCSI OEM partner for Adaptec, although they expect that deal further down the road.

— Dave Raffo, Senior Editor, Byte and Switch