Cagey Xiotech Takes $40M

SAN specialist Xiotech has picked up $40 million in funding to develop technology recently acquired from Seagate's mysterious Advanced Storage Architectures (ASA) division.

"We used part of it to do the acquisition, and the remainder of it will be used to get the [ASA] technology into a shape that we can take to market," says Casey Powell, Xiotech's CEO.

Xiotech nabbed Seagate's highly secretive ASA Group for an undisclosed fee earlier this month, prompting speculation that the vendor was planning to develop some form of storage controller.

Set up just over five years ago, the ASA division was formed to develop "next-generation architectures" for Seagate's OEM partners, which include IBM and EMC.

Xiotech, which has been attempting to branch out into new areas, has not said what it will do with the ASA division, though the vendor offloaded its own proprietary RAID controller some years ago in favor of controllers sourced from other firms, which are now built into its Magnitude 3D system. And there has been talk that the ASA group was working on controller-related technology at Seagate.CEO Powell was not willing to divulge his ASA game plan today. "It's too early for that," he says, refusing to confirm whether the vendor has a new controller in the works.

The exec adds that, despite today's cash influx, the ASA-based technology is unlikely to hit the market anytime soon. "It's probably within the realms of 2008, certainly 2009," he says. "Its a big undertaking."

Today's funding was purely to support the ASA acquisition, according to Powell, looking to dispel any question-marks over the state of Xiotech's finances.

"The company is profitable for nine out of the last ten quarters, so it's not as if we needed to raise money," he explains. "We got the money that we needed to bring [the ASA Group's] technology to market."

Despite Xiotech's recent performance, the vendor is somewhat less forthcoming about other aspects of its financials, and has not revealed its total funding figure to date.Nonetheless, Powell confirmed that today's round was led by Seagate's chairman Steve Luczo. Existing investor Oak Investment Partners also participated in the round.

The last few years have certainly seen big changes at Xiotech, which underwent layoffs and a major restructuring in 2005 and recently moved into new areas such as e-discovery and storage services.

Xiotech's fortunes nonetheless appear closely tied to those of Seagate. The Eden Prairie, Minn.-based vendor was itself spun out of Seagate in 2002, and today's announcement appears to underline the strong ties that still exist between the two firms. In addition to leading the round, Seagate exec Luczo has also joined Xiotech's board of directors.

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