NetApp to acquire Engenio. Will it work?

This is the storage industry first big acquisition for 2011. NetApp is making its move to purchase Engenio, the storage division of LSI Logic.

LSI Logic's storage controllers have been OEMed by several big boys, notably IBM, Sun, SGI, Teradata and Dell. From a business sense, NetApp has made a good buy because it is likely that IBM and SGI will maintain the OEM agreement. I don't much about Teradata and I won't comment much there, but the Sun agreement is likely to end soon. Oracle is slowly but surely consolidating their own storage and the 6000 series is sticking out like a sore thumb as Oracle is pushing their ExaStor as well as the Sun 7000, a technology that was pretty decent from the Sun acquisition. Dell has put the LSI controller in the PowerVault 3000 series and those are the entry level storage. That OEM relationship is likely to continue.

With the acquisition (if it goes through), NetApp will have a decent OEM business but NetApp's Dave Hitz in his blog said that they will position the Engenio SAN block-based storage for high performance markets.

The market reacted very strongly in a negative fashion, believing that NetApp will have a challenge maintaining their strategy of FAS for unified storage and the Engenio SAN for high performance markets. The reaction confirms that customers' perception will be something NetApp has to manage very carefully. And the competitors will have a field day shooting at NetApp. This will get very interesting because suddenly, NetApp Unified Storage story is no longer what it is anymore.