Fusion-io puts down $119M to pick up storage maker NexGen and add enterprise adoption

In hopes of going beyond way beyond webscale computing and spurring wide enterprise adoption of flash memory, Fusion-io on Wednesday announced in a filing that it has paid around $ 119 million in total for NexGen Storage.

The deal, which includes $ 114 million in cash and around $ 5 million in stock, expands the Fusion-io product line. NexGen makes hybrid storage arrays that incorporate solid-state storage and hard disk drives, which altogether can provide up to 192TB in total storage capacity. Fusion-io already provides the flash in the NexGen gear, and now Fusion-io will be able to move beyond the original-equipment manufacturer relationship and make revenue directly by selling these boxes.

Jim Bagley, senior analyst at Storage Strategies NOW, thought it was a good move for Fusion-io. The market for hybrid storage arrays will see “several billion” in sales this year, compared with less than $ 1 billion for all-flash arrays, he said.

The NexGen buy comes at a critical time for Fusion-io. Fusion-io’s revenue in the first quarter of the year — the company’s fiscal third quarter — declined 7 percent year on year to $ 87.7 million. Its net loss was $ 20 million, compared with $ 4.7 million a year earlier. Take those as signs that Fusion-io needs to expand its market.

While Fusion-io can say that Apple and Facebook are big customers, it could face new challenges in widening adoption of its flash memory in the next year or two as big players move in to flash. IBM has gone off on a $ 1 billion flash campaign, and storage heavyweight EMC is coming out with a few new PCI-Express flash memory cards.

Fusion-io knows this. It has added to its software holdings with IO Turbine in 2011 and with ID7 just last month. With more companies coming up with options for software-defined storage, Fusion-io might boost its software portfolio further this year while at the same time rolling out new lower-end hardware in the coming months thanks to the NexGen buy. At least Fusion-io knows it needs to act.