Some big names have been sniffing around at Aliso Viejo’s SiliconSystems Inc., a privately held maker of flash memory drives for industrial uses.
Disk drive makers Scotts Valley-based Seagate Technology LLC and Lake Forest’s Western Digital Corp. have been arranging chats with Chief Executive Michael Hajeck for some time now.
The big guys are looking to make sense of the market for solid state drives,drives made of non-moving flash memory chips,that are quickly replacing hard drives in high-end data storage networks, notebook computers and other industry-specific devices that can’t break down.
Solid state drives made of flash memory are more durable, save power and are faster at some tasks than traditional disk drives.
Makers of electronics for data storage networks, including Costa Mesa’s Emulex Corp., Aliso Viejo’s QLogic Corp. and Milpitas’ LSI Corp. are also looking into solid state drives.
“A week doesn’t go by that we aren’t contacted by someone in the storage industry,” Hajeck said. “They are in the early stages of exploration and understanding who the players are in this market, how it will affect them, what’s real, what’s hype and when they’ll need to get in.”
Hajeck insists that his young company isn’t for sale.
Networking gear makers Brocade Communications Systems Inc. of San Jose and NetApp Inc. of Sunnyvale are also said to be interested, according to Hajeck.
All the buzz “increases the size of the pie,” for a time when he might make a move, he said.
Potential suitors might not only be after SiliconSystems’ flash drives, according to Krishna Chander, a storage analyst at El Segundo-based market tracker iSuppli Corp. They may have set their sights on its controllers,interface chips that allow the drive to communicate with the brains of a device, he said.
“The hard drive companies understand the interface between a microprocessor in a PC and the storage device is key,” Chander said.
Santa Ana’s STEC Inc., which sells flash drives to the world’s top makers of servers, has seen a lot of success of late due to an exclusive deal it landed with Hopkinton, Mass.-based EMC Corp.
“STEC has an early lead in one segment of the market,” Hajeck said. “I think it’s impressive what they have done.”
STEC figured out a way to make its controller technology the best of what’s available, making the small publicly traded company the envy of giants like Seagate.
Disk drive makers “are all looking for a good controller company,” Chander said.
Hajeck got into the business when solid state drives weren’t seen as a viable market.
“For nearly six years now, we have been myopically focused,” he said. “When we started and told people we are going to make solid state drives, people thought we were a couple eggs short of a dozen. But the market
place has developed quite nicely.”
SiliconSystems’ biggest customers are in telecommunications.
Its drives go into cell phone base stations on wireless networks run by Sony Ericsson Mobile Communications AB, France’s Alcatel-Lucent and Canada’s Nortel Net-works Corp., among others.
The solid state drives go into a slew of industrial devices, including video surveillance systems, voting kiosks and automated manufacturing gear.
Some get sold to top-tier defense contractors for use in destroyer ships, planes and tanks.
Another niche market is “interactive kiosks,” such as digital slot machines, self-check-in stations at airports and cash registers.
SiliconSystems is growing at a rapid clip. Sales are up 50% for the 12 months through June, Hajeck said. The company has had four years of consistent profitability, he said.
“Our business continues to be very robust,” he said.
The closely held company doesn’t disclose revenue figures. The Business Journal estimates that SiliconSystems sees $20 million to $50 million in annual sales.
Hajeck has nearly two decades in the storage industry under his belt.
He tinkered with the first flash drives at Milpitas-based SanDisk Corp. and did stints at Torrance-based MicroNet Technology Inc. and SyQuest Technology Inc., now called SYQT Inc.
He built up and ran the business that later became STEC after the company sold off its SimpleTech consumer line a year ago.
The market for solid state drives is still small.
ISuppli analyst Chander said it could reach roughly 30% of the disk drive market by 2011. Right now it’s less than 10%.
“I don’t think it’s too far away to think that one of these guys will make the leap into the market,” Chander said. “Solid state drives are here to stay, but they are nascent.”
