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Why IBM's Flashing Its Storage Cash

Stocks in this article: IBM EMC FIO NTAP LSI

The TMS purchase may also have broader implications for the storage industry, according to Sterne Agee analyst Alex Kurtz, who says that it could prompt rivals to open their wallets. Specifically, the analyst will be keeping his eye on storage giant EMC (EMC) which has been touting its VFCache technology as a way to place flash in servers via a PCIe card.

"We believe EMC may have to begin to consider acquiring Fusion-io if its effort with VFCache doesn't materialize in the first half of 2013," explained Kurtz, in a note. " NetApp's (NTAP) upcoming partnership with Fusion-io may also act as an accelerant to EMC considering Fusion-io if that joint product development generates traction as well."

Flash specialist Fusion-io, which reported stellar fourth-quarter results last week, has already carved out a lucrative niche in corporate data centers. The Utah-based company counts Apple (AAPL) and Facebook (FB) amongst its customers, and also boasts Apple co-founder Steve Wozniak as its chief scientist.

Endpoint Technologies' Kay would not rule out the possibility of an EMC/Fusion-io deal, noting that valuations are attractive at the moment. "For EMC to backfill their offering by grabbing a Flash supplier in a down market would make a lot of sense," he said. "I don't know whether I would bet on it, but it's conceivable."

EMC, however, has been banging the drum about its Flash strategy, recently noting that more than 100 customers are using VFCache.

The Hopkinton, Mass.-based company, which shipped 24 petabytes of flash drive capacity in 2011, also acquired storage array specialist XtremIO earlier this year to boost its efforts in this space. By way of comparison, a single petabye stored on CD-ROMs would create a pile of discs more than a mile high, according to the Library of Congress.

Salt Lake City-based Fusion-io has a market cap of $2.64 billion.

Fusion-io and EMC declined to comment on this article.

-- Written by James Rogers in New York.

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