Networking Chip Vendor Avago Plans Major Storage Push With LSI Acquisition

With the acquisition, valued at $6.6 billion, San Jose, Calif.-based Avago expects to be positioned to address opportunities combining data center and mobile data traffic, said Hock Tan, Avago president and CEO, according to a transcript of the early Monday conference call unveiling the acquisition.

The acquisition "significantly increases Avago scale and balances our end [market] exposure by adding a market leader [in] enterprise storage to our growing wireless [business]," Tan said.

[Related: TechEd: LSI, Microsoft Team On Low-Cost Clustered Server, Storage Solution ]

LSI brings Avago a major storage technology portfolio including server-based PCIe storage accelerators, flash storage, and hard disk drive chips, as well as processors and ASICs for building mobile and enterprise data center networks.

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The company also brings a channel-focused sales team for its controllers and storage devices, as well as an A-list of storage and networking OEM customers including Cisco, Dell, Oracle, Intel, Fujitsu, Seagate, Western Digital, Micron, Samsung, Kingston Technology, Toshiba and Samsung.

Maintaining those relationships is important for the success of the acquisition, said Todd Swank, senior director of product marketing at Equus Computer Systems, a Minneapolis-based custom system builder and long-term LSI partner.

"We all know the storage business will continue to grow, and LSI seems to have the right technology," Swank said. "Intel uses LSI's controllers on most of its server motherboards, as well as in its RAID cards. If a company like Intel buys from a company like LSI, you know it's good."

Swank said he does not expect Avago's acquisition of LSI to impact Equus' relationship with LSI.

Investors cheered the planned acquisition, which was unveiled before the opening bell of the stock exchange. Shares of Avago rose 9.5 percent Monday, while LSI's share prices rose 38.3 percent.

The acquisition is being funded with $1 billion in cash from Avago's internal sources, a $4.6 billion loan and a $1 billion investment from Silver Lake Partners, one of Dell's partners in that company's move to go private.