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Adaptec buys its way further into storage market

The data transfer device company says it will acquire Distributed Processing Technology in a bid to expand its presence in the storage market.

Adaptec, a maker of peripherals and software, today said it will acquire Distributed Processing Technology for $235 million.

Adaptec will assume all outstanding shares of privately held DPT, as well as the cost of taking on its stock option plan.

DPT makes RAID controllers and other storage products for sale directly to PC manufacturers or resale through wholesalers to computer dealers.

Adaptec will use DPT's technology to further its penetration into the storage area network, external RAID, and Unix storage markets.

In the short term, Adaptec will support DPT's existing customers and products, but the company plans to merge product lines as soon as possible.

"RAID is one of the key growth areas, particularly because of the demand for online information and people's desire to protect it," said Bob Schultz, Adaptec's chief operating officer. "This acquisition is about how we continue to feel that growth in our RAID business. We believe a key to winning in that market is having a family of products that allow customers a smooth migration, so they can move from an integrated RAID solution up to a storage area network."

Adaptec expects to conclude the acquisition sometime between mid-December to mid-January. The company plans layoffs related to the merger.

Adaptec's strength is more in embedded and integrated RAID solutions, but through DPT the company will bolster its portfolio of external RAID products, which are essential building blocks for storage area networks.

Where Adaptec gains most is its RAID board controller business, which are components essential to developing larger components for connecting storage area networks to servers, said James Porter, president of Disk/Trend.

Adaptec and DPT sold about 42,000 and 56,500 RAID controller boards, respectively, in 1998, far behind market leader American Megatrends with 258,000, according to Disk/Trend.

"It's a move that would essentially double the RAID board business that Adaptec has and strengthens their movement into RAID board controllers, although it doesn't put them in a leadership position," Porter said.