Dot Hill Acquires Chaparral To Enhance Storage Arrays

The storage industry got a little smaller this week as Dot Hill Systems acquired Chaparral Network Storage.

Dot Hill, a Carlsbad, Calif.-based vendor of storage arrays and software, acquired Chaparral, a Longmont, Colo.-based developer of storage appliances and mid-range RAID controllers and data routers, for $62 million in cash and the assumption of about $10.4 million in obligations.

The acquisition was a natural fit for Dot Hill, said Dana Kammersgard, CTO of the company.

Dot Hill's revenue tripled in 2003 compared to 2002, due largely to an OEM deal with Sun Microsystems for Sun's StorEdge 3000 series of storage arrays, which are based on entry-level controllers from Taiwan-based Infortrend, said Kammersgard.

Chaparral, on the other hand, develops midrange controllers, which Dot Hill hopes to use in its arrays to speed up time-to-market for its products, Kammersgard said. "We could have built them from scratch," he said. "But that might take two to three years. Chaparral is one of the only developers of this technology available (to be acquired) in this market."Dot Hill currently has no immediate plan to end its Infortrend relationship, but that may happen eventually, said Kammersgard. Because both Dot Hill and Chaparral recently refreshed their storage subsystems, Kammersgard expects there to be no change in product offerings from the two in the near future.

About 85 percent of Dot Hill's revenue comes from the OEM deal with Sun Microsystems, Kammersgard said. The company also has OEM relationships with HP and Network Appliance, as well as some telcos, and also sells via a few regional distributors. The company does not have a direct sales force, he said.

Dot Hill, which recently underwent financial restructuring, had $191 million in the bank before the Chaparral acquisition. "This acquisition is better than getting 1.2 percent in a savings account," Kammersgard said.

Kammersgard would not rule out future acquisitions. "It's nice to have cash to invest," he said. "Two years ago, we couldn't say that."

Dot Hill in September went through a secondary offering for venture capital and raised $150 million. Sun currently has warrants to purchase up to 3 percent or 4 percent of Dot Hill's stocks that has not been exercised, said Kammersgard.0