Xyratex RAIDs Ario IP

Xyratex made a small acquisition today to help protect a larger pickup it made 17 months ago.

Xyratex says it has reached a tentative agreement with Ario Data for RAID controller intellectual property and a team of developers. (See Xyratex Buys Ario Data IP.)

The major piece of the acquisition includes RAID code that Ario licensed from nStor, which Xyratex purchased for $21.2 million in July 2005. (See Xyratex Gobbles nStor.)

A Xyratex executive says his company bought the RAID code to make sure neither Ario nor anybody else uses it to compete with the nStor controllers. Like Xyratex, Ario sells products to systems OEMs.

Xyratex did not pick up all of Ario's assets, and Ario remains in business -- for now -- with new management."This was a defensive move, we wanted that code back," says Todd Gresham, former nStor CEO and now Xyratex EVP of storage and network systems. "They have other IP and hardware that overlaps with ours -- we have no interest in that."

Gresham says Xyratex will also hire "a small number" of Ario developers as part of the deal, which he expects to close by December 29. He would not say how much the deal is worth or how many people are involved.

Xyratex, whose OEM partners include 3PAR, Compellent, EqualLogic, Network Appliance, and Rackable Systems, started shipping the low-end F5402 based on nStor technology in April. (See Xyratex Launches RAID System.) The product comprises single or dual-controller systems with two or four 4-Gbit/s Fibre Channel host links and support for up to 60 SAS and SATA drives.

Ario used the RAID IP as part of its Capacity Storage Array (CSA) series of bladed SAS and SATA expansion disk subsystems rolled out earlier this year. (See ARIO Pioneers Position.) The future of that product line is clouded, as is the path Ario will follow.

Mark Pollard, acting VP of marketing and business development for Ario, says the company is building a new long-term business plan. "The company is not out of business," Pollard says. "Once we get this deal done, we can focus on a long-term strategy."That strategy is in the hands of former Snap Appliance executives Pollard and interim CEO Eric Kelly. Kelly was CEO and Pollard was marketing VP at Snap when Adaptec acquired the NAS vendor for $100 million in July 2004. (See Adaptec's $100M Snap Decision.)

The deal comes at the end of a year of twists for Ario. When it picked up $8 million in funding in September, then-CEO Russell Krapf said the startup was shifting its product base from controllers to storage systems based on the CSA family. (See System Startups Get Fresh Funding.) Then Krapf jumped to a sales VP job at chip vendor SolarFlare Communications in early November, and Kelly replaced him.

Pollard says the Xyratex deal gives Ario some much-needed money and gets it out of a losing proposition. "To be successful in the JBOD and RAID business, you have to have a lot of OEM partners and high volume because it's an expensive venture," he says. "Xyratex had all of that."

Dave Raffo, News Editor, Byte and Switch