LSI Corp. announced Wednesday that it is selling its Engenio data storage systems division, which includes the Wichita research and development facility at 37th North and Rock Road.
The company is selling the division to NetApp of Sunnyvale, Calif., for $480 million in cash. The sale will take about 60 days to close, according to LSI.
LSI's CEO Abhi Talwalker told analysts during a conference call that the company is selling because the division, once the company's bright spot, is becoming a drag.
Storage system division revenue grew 10 percent in 2010 to $705 million, slower growth than the semiconductor division's 18 percent, and had lower margins. The company also saw competition getting tougher, and the need for large investments to keep up.
NetApp, a $3.9 billion company that makes storage and data management equipment, is taking a different view, said CEO Tom Georgens.
NetApp is buying the Engenio storage division because Georgens thinks its products have strong long-term growth potential, he told analysts during another conference call Wednesday.
As part of LSI, the data storage units were sold to large brand-name server makers such as IBM and Sun Microsystems and rebranded for sale using those names. Growth only went as far as these manufacturers' sales were growing.
But not only does NetApp think it can continue to sell Engenio products to these big companies, it thinks it can sell them through its own sales channels.
"We've got the channels to exploit this technology that the seller could not," Georgens said.
On the conference call, Georgens said that NetApp would consolidate the Engenio operation's administrative and sales functions into the existing NetApp functions following the sale.
This will be the fifth incarnation for the plant at 37th and Rock since it was built in 1974 to make minicomputers for NCR. It also has been owned by telecommunications giant AT&T and chip-maker Symbios. LSI Logic acquired Symbios in 1998.
The 330,000-square-foot plant has been making data storage systems for businesses since the early 1990s.