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

This story was corrected at 6:28 p.m. PT to clarify Fusion-io’s plans for NexGen Storage. Fusion-io will not sell the NexGen appliances, CEO David Flynn said.

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

The deal includes $114 million in cash and around $5 million in stock. 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 has provided the flash in the NexGen gear. Going forward, rather than sell the NexGen appliances, Fusion-io CEO David Flynn said the company will “sell the NexGen technology as a platform that allows third-party integrators to build systems.” That means storage appliances will be sold under different brand names and labeled “Fusion-powered IO,” Flynn said.

Jim Bagley, senior analyst at Storage Strategies NOW, thought the purchase 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 (s aapl) and Facebook (s fb) 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 (s ibm) has gone off on a $1 billion flash campaign, and storage heavyweight EMC (s 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 could follow on its NexGen buy later this year by boosting its software portfolio further. At least Fusion-io knows it needs to act.