Seagate CEO Says He May Acquire Software Companies

Seagate Technology (STX) Plc, a maker of storage drives, is on the lookout for software acquisitions that can help it meet booming demand for cloud computing, said Chief Executive Officer Stephen Luczo.

The company is determining where it has holes to fill and what to potentially buy, Luczo said in an interview yesterday at Bloomberg’s New York headquarters. The CEO said he sees a bubble in the valuation of cloud-storage providers, which could present buying opportunities when it deflates, he said.

“We do need some technology that we don’t have on the software side,” Luczo said. “When do you buy it and what you pay for it is a different question. Right now it seems a little frothy.”

Western Digital Corp. (WDC), the world’s largest maker of hard-disk drives by market value, agreed yesterday to buy Virident Systems Inc., a company backed by Seagate, for $685 million to expand in flash storage. Flash is a preferred technology for cloud computing because it’s faster and more efficient than traditional spinning disks.

Earlier today, Cisco Systems Inc. (CSCO), the biggest maker of networking equipment, said it would buy Whiptail, which makes solid-state memory systems.

Shifting Strategy

Seagate, which has been making products based on the needs of equipment manufacturers, is shifting its strategy to focus on technology buyers, including cloud-service providers, Luczo said. That will require software and silicon-based products, which Seagate may have to buy.

“Having silicon technology in-house is really important,” Luczo said. He didn’t name any companies that Seagate may pursue.

Fusion-io Inc. (FIO), a provider of flash-memory technology for data centers, surged 26 percent yesterday after the Virident announcement, valuing the company at more than $1.3 billion. Rival Violin Memory Inc. (VMEM) filed last month to raise as much as $172.5 million in an initial public offering.

Storage startups have been raising big funding rounds on the private market as well. Pure Storage Inc. was valued at more than $1 billion in August in a $150 million financing round led by investors including T. Rowe Price Group Inc. Nimble Storage Inc. raised $40.7 million a year ago.

Seagate rose 2.3 percent to $41.07 at the close in New York time. The stock has gained 35 percent this year.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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