Expand Snaps Up DiskSites

WAN optimization specialist Expand Networks today snapped up WAFS vendor DiskSites in an all-stock deal that gives DiskSites shareholders a 13.5 percent stake in the combined company.

Amir Chitayat, Expand Networks' president, would not put a financial value on the deal, explaining to Byte and Switch that he is "not at liberty" to discuss the valuation. The price tag, however, is unlikely to match the $78 million that another WAN optimization specialist, Packeteer, coughed up for WAFS vendor Tacit last week. (See Packeteer Picks Tacit, Sources: Packeteer Eyeing Tacit, and Packeteer Buys Tacit.)

DiskSites, with around 25 employees, is a much smaller firm than the 100-strong Tacit, and Expand, unlike Packeteer, is a private company. Nonetheless, this latest deal underscores the growing M&A momentum in this space. (See Cisco Acts on Actona, Cisco Chomps FineGround, Peribit Deal: More to Come, F5 Snaps Up Swan Labs, and WAFS vs WAN Optimization: No Contest.) Other recent activities have also reflected the growing importance of WAFS and WAN optimization, such as Riverbed's decision to go for an IPO. (See Riverbed Makes It Official and Sources: Riverbed Reaches for IPO.)

The Expand/DiskSites deal is not surprising. The two firms signed an OEM agreement last August, and DiskSites' technology is already available within Expand's Compass family of hardware. (See Expand Intros WAFS, CIFS Acceleration.) "The main driver [behind the deal] is tighter integration between the technologies and the ability to launch additional functionality," explains Chitayat, although he won't reveal specific plans.

Chitayat also expects that, with Expand now holding DiskSites' intellectual property, there will be more long-term OEM opportunities.As well as inheriting DiskSites' existing relationship with OKI in Japan, Chitayat expects new doors to start opening for Expand, which currently has only three small OEM deals with LakeView Technology, EMS Technologies, and LTI DataComm.

"We're already in discussions with several large OEMs," says Chitayat. "Our acquisition of DiskSites will let us consummate some of these before the end of the year." The exec would not confirm, however, whether any of these potential partnerships are on the scale of Riverbed's lucrative deal with HP, although he says that they are "of various sizes and global in nature." (See Riverbed Licenses Tech to HP.)

The exec adds that Expand also plans to launch a low-cost, stripped-down version of its current WAFS offering. Priced at around $5,000, the 4920 device comes with both WAN optimization and WAFS, although the vendor is now developing a WAFS-only version for around $2,750. "That will be launched this quarter, when the deal is closed," predicts Chitayat.

According to Chitayat, the majority of the DiskSites workforce will now be coming over to Expand, although he would not reveal whether CEO Amir Shaked will be joining them. (See DiskSites Announces CEO.) The integration of the two companies, he says, will be relatively straightforward, thanks largely to the fact that the bulk of DiskSites' personnel are in Israel, just minutes away from Expand's Tel Aviv R&D facility. But at this stage, he says, the future of DiskSites' office in Potomac, Md., has not been decided.

Roseland, N.J.-based Expand is also going to borrow DiskSites' software-based approach, and Chitayat says a software-only version of Compass will be available "for certain third-party server solutions" by the end of the year. (See DiskSites Unveils Architecture.) "We have had some requirements from our customers to deploy Compass technology on the likes of IBM and HP servers," he adds. Up until now, Compass has only been available as hardware.The deal is expected to close within the next 60 days.

James Rogers, Senior Editor, Byte and Switch

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