(Bloomberg) -- NetApp Inc. agreed to buy SolidFire Inc. for $870 million in cash to boost its presence in the growing market for systems that can retrieve and store vast amounts of data at rapid speeds.
NetApp was the No. 4 player in the market for flash-storage devices, which use the same fast computer memory that’s found in smartphones and tablets, according to Gartner Inc. SolidFire, based in Boulder, Colorado, had sales of about $50 million in 2014, while NetApp had more than double that amount in the flash category, Gartner said.
The two companies announced the deal in a statement Monday. NetApp Chief Executive Officer George Kurian is seeking to trim costs while focusing on areas such as flash storage and software to help companies manage and organize data that is stored both on internal networks and in public cloud systems.
At the same time, traditional storage systems are seeing sales declines and Kurian told analysts last month that overall technology spending remains "constrained." NetApp hasn’t posted a sales increase in the past eight quarters.
"SolidFire represents an investment into the newer and faster growing parts of the storage market," Kurian said. "SolidFire will materially improve the growth rate of NetApp over time. It will take time and investment to achieve that. And at that point it will also improve earnings. In the near term it will be dilutive to earnings because we need to invest to make it succeed."
Projections for the flash market keep growing as sales for the systems, which stash information on chips instead of hard drives with spinning magnetic disks, almost reached $1.6 billion last year, two years earlier than IDC had predicted. Customers are looking to this type of storage because it is speedier than traditional hard drives and prices for flash are decreasing.
Storage market leader EMC Corp., which is being bought by Dell Inc., is also the flash market leader and No. 3 player Pure Storage Inc. has a market value of about $3 billion after holding an initial public offering in October.
Flash is "one of the bright spots in a very dark storage market," said Daniel Ives, an analyst at FBR Capital Markets & Co. "With EMC busy dealing with the Dell acquisition, we view this as a smart strategic acquisition that should further help its brand and expand its product wings on the flash front."
Solidfire has raised $150 million in funding from backers such as New Enterprise Associates, Valhalla Partners and Samsung Ventures. NetApp said the deal will close in its fiscal fourth quarter, which ends in April.
--With assistance from Selina Wang.
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