NexGen spinoff out of SanDisk to return to all-channel model

While NexGen's R&D and overall sales benefitted significantly from being part of larger companies, moving forward they believe they will be in a stronger position to satisfy customers as a separate company.

Chris McCall-NexGen Storage 250

Chris McCall, NexGen’s SVP of Marketing

NexGen storage, which makes hybrid storage appliances that utilize PCIe flash storage rather than SSDs, has completed its spin-off from SanDisk, and is once again a standalone company. As a standalone, it will return to the 100 per cent channel model it practiced before it was acquired.

For NexGen, the spinoff marks the conclusion of an eventful 20 months, in which it was first acquired by Fusion-io in 2013, then went to SanDisk when Fusion-io was acquired by SanDisk last year.

“Fusion-io acquired us because while they had all the big OEMs locked down, they were starting to see a proliferation of people designing PCIe flash, which they had been the first to do,” said Chris McCall, NexGen’s SVP of Marketing. “With this competition, they felt the flash business getting commoditized, so they wanted to move up the stack as opposed to selling just cards. They sold the cards into servers, but none of the major storage vendors had adopted PCIe, and they wanted a way into the storage market. We would bring them more IP and intellectual property to go up the stack in that market.”

McCall said that while there was some conflict with Fusion-io’s broader business, it was minor, because Fusion-io sold mainly into the server market, where NexGen didn’t really compete. However, once Fusion-io was acquired by SanDisk, the conflict with the main company business increased significantly.

“From our perspective, we perceived greater conflict within the SanDisk portfolio than we had with Fusion,” McCall said. “Unlike Fusion, SanDisk does work with enterprise storage vendors, so we recognized the conflict immediately and there were a lot of questions on our side, so as plans developed it wasn’t surprising that we took this path.”

SanDisk also perceived that NexGen was not a good fit under its umbrella.

“Hybrid systems incorporating hard-disk drives are not part of SanDisk’s strategic focus,” said Sumit Sadana, SanDisk’s EVP and chief strategy officer, in a statement announcing the divestiture. “Spinning out the ioControl business allows us to focus our resources on our core business, while positioning the independent company to address the significant opportunities in the dynamic enterprise storage market.”

McCall did emphasize, however, that despite the conflicts, NexGen prospered as part of the two larger companies, where much more funding was available for research and development than before. They have acquired hundreds of new customers, had record revenue in Q4, and had triple digit quarter-over-quarter growth.

“The twenty months where we were part of Fusion [for 14 months] and SanDisk [for six] really helped us from an R&D perspective,” he said. “Fusion was heavily committed to that, and we nearly tripled our R&D staff. Both Fusion and SanDisk were helpful in trying to take us to market in the right manner. SanDisk is a world class Fortune 500 company. We are excited to be spun out on our own, but there were significant advantages where we were. We believe we have a better chance for success on our own, because as a standalone company you have a lot more freedom, but we had tremendous support as part of those companies.”

McCall said the new NexGen’s private equity financing will ensure the R&D is kept up.

“We have secure private equity funding for aggressive R&D sales and marketing investment,” he said. SanDisk retains no ownership stake but are a strategic and important supplier to NexGen.

“We use their PCIe and we resell their server-side caching software,” McCall added. “We collaborate on many different levels.”

Going forward, McCall said NexGen will be able to focus on their tech vision and core strategies.

“We will be better able to serve customers with the products they want and evangelize our vision in the marketplace,” he said. “We have designed our entire product line around PCIe flash. We don’t use SSDs. So we have more performance, and we have more capacity because we don’t consume disk slots. A few other vendors use PCIe, but all the majors and most of the new guys still use SSDs. Our R&D is over 95 per cent focused on software development. We don’t have any hardware engineers here. Our software is also based on quality of service, and tells when to keep data in flash and when to move it off, so it’s much more effective.”

Going forward, McCall said that NexGen will also return to the 100 per cent channel model they used before they were acquired.

“We have a two-tier channel model using distribution, but it’s a relatively small channel,” he said. “We focus on VARs who want a differentiated story and who want to secure new customer footprints and new accounts. It has been difficult to focus on that part of the business the last 20 months. Now we can put 100 per cent of our effort behind channel companies. That’s always harder in larger companies that have multiple routes to market. We were 100 per cent channel before the Fusion acquisition and we will be 100 per cent dedicated to partners moving forward now that we are a standalone again.”

Later this month, NexGen will be making announcements articulating its vision as a standalone going forward, as well as new solutions which support it. Details are, however, restricted until the announcements go live.