WD Expands its Graveyard with Tegile Acquisition

WD is increasingly becoming the place where storage products go to die. Tegile is the latest company to submit to the undertaker. Let’s have a look at WD’s acquisition history:

Skyera: WD invested in and later acquired this all-flash array startup that failed to ship a functional product. Less than 6 months later, Skyera vanished.
STEC: Once an innovator in SSDs, STEC was in a death spiral and facing ugly litigation when WD bought it for $340M. STEC’s core SAS SSDs were off WD’s website less than 18 months later.
Virident: WD paid $685M for this proprietary non-NVMe technology. Later, WD replaced it with third-party (Microsemi) NVMe solutions.
Fusion IO: Fusion IO, a billion-dollar deal absorbed by WD via SanDisk, failed to blossom as Fusion IO’s high-priced salesforce clashed with WD’s commodity mindset.
InfiniFlash: Once the highlight of SanDisk’s push into the data center, InfiniFlash had just two OEMs (IBM and Tegile). IBM killed it earlier this year.
FlashSoft: WD attempted to reinvigorate this flash caching software inherited via SanDisk with a new release in June 2016, but today, it’s defunct.
VeloBit: WD acquired this flash software optimization company in 2013 for an undisclosed sum, but no reference to the technology exists anymore.
Arkeia Software: WD also acquired this backup software company in 2013 but by 2015, WD had “murdered” it according to sources.
Pliant: SanDisk paid $327M for this SAS SSD maker, but 2 years later, SanDisk canceled all future development of Pliant’s controller.
Smart Storage: Rinse and repeat the Pliant strategy above.

The Tegile acquisition is another desperation hail-mary. It’s widely known that Tegile was running out of cash. No acquirers showed up as the product is ill-suited for the cloud. Existing VC’s saw Tintri’s horrific IPO and concluded that unprofitable storage companies are DOA in the public markets. The Tegile deal was a loss for the VC’s that pumped $175 million into it (WD being among them). Rather than take the full loss, WD paid well under $100 million to acquire it.

WD is amassing assets without a doubt, but so far, its execution on its acquisitions, other than SanDisk’s NAND fab, is poor. That said, WD has woven a story about end-to-end storage technology ownership that Wall Street likes. The reality, though, doesn’t match that storyline.

WD has now crossed the proverbial line by acquiring a systems company and competing (in theory) with its customers. Seagate tried this too, first with XIOtech and later with Xyratex and Dot Hill, though it has already sold off Xyratex’s ClusterStor to Cray. The jury is out as to whether HDD vendors can make it as systems players. But certainly WD’s move may make Samsung and Micron sit up and think carefully. Is now the time to get serious about moving up the value chain?