This turned out to be an interesting week after all, even with no news. I had been expecting that we’d coast into earnings under the radar.
For better or worse SanDisk is now back in the limelight. I’m not sure the mainstream media exactly gets the story, but no matter.
I’m still expecting curiously remarkable numbers, thanks to the strength of NAND pricing, inventory and so forth. While this may be something of a one time event, there also appears to be a lot of promising stuff going on behind the scenes.
Soon enough we’ll find out whether SanDisk decides to share on the conference call, or whether analysts ask the right questions. I’m not expecting much. The numbers themselves will likely blind everyone.
In any case, recently I’ve been spinning the wheels on obscure trails.
SiliconSystems is no more. The company was acquired by Western Digital Corp (WDC) in March of this year as part and parcel of a WDC’s entry into SSDs.
I stumbled onto the SanDisk/ SiliconSystems angle, while working on SSSS LLC. SiliconSystems had a penchant for referring to its products as “Solid State Storage Solutions” so it showed up in a couple of searches related to SanDisk and that phrase.
The name rang a bell and sure enough after a little more digging I realized why.
Back in 2004 SanDisk and SiliconSystems signed a cross license agreement covering flash patents.
Some think this license agreement will now give WDC open-ended access to SanDisk’s patent portfolio. Highly unlikely. The original press release is clear. The patent license is a limited deal:
“This license agreement is tailored to SiliconSystems’ exclusive focus on the enterprise system OEM market. We are pleased with the agreement and look forward to future business cooperation with SiliconSystems.”
I really have no idea what sort of “business cooperation” could have been contemplated back in 2004. SSSS LLC would be one possibility. More on that later.
SanDisk was one of the early investors in SiliconSystems, probably 2003 or 2004.
SiliconSystems was founded in 2002 by Michael Hajeck, an ex-SanDisk employee. After a three year stopover at STEC, he started up SiliconSystems, initially working out of his home.
Micheal Hajeck is continuing on now as Senior Vice President & General Manager, Solid State Storage Business Unit, Western Digital.
From the beginning SiliconSystems’ focus was exclusively the Enterprise System OEM market- a market that SanDisk essentially abandoned early in 2005 when it discontinued its industrial and standard grade families of industrial products.
SiliconSystems was one of the companies that aggressively moved in to fill the void left by SanDisk.
The strategic retreat made perfect sense for SanDisk with its focus on consumer markets and MLC NAND.
SiliconSystems was happy to stay with SLC, the name of the game for markets where performance and reliability take precedence over cost. As one would expect, Siliconsystems’ SLC seems to have come primarily from Samsung, which also took a stake in the company.
By 2008 SiliconSystems had reached a respectable #9 in the SSD games.
Interestingly, SanDisk was #3. Not a bad showing considering.
SanDisk’s SSD strategy is MLC/consumer-market centric. A market which is taking its time developing.
On the other hand, the enterprise space has already taken off. SLC’s cost works just fine for those enterprise players with the deep pockets.
For consumer markets, NAND costs need to drop further. We are probably a couple of years, and two technology nodes, away from lift-off.
As an aside- a few more thoughts on SSSS LLC.
Solid State Storage Solutions LLC
I am starting to feel that there is a distinct possibility that (SanDisk’s) SSSS LLC is not the Microsoft/ SanDisk licensing entity.
This doesn’t take anything away from the Microsoft/Sandisk U3+ effort, it just means that the MSFT/SNDK joint effort, if it is still alive, is just something else, with another name we don’t know yet.
The MSFT/SNDK effort is about “a next-generation software and hardware solution to place application programs and personal customization on USB flash drives and flash memory cards.” Something like “U4”, “StartKey”, or “Window’s Companion” or some such would fit the bill.
The name “SSSS LLC” is all wrong for this endeavor.
“Solid State Storage Solutions” is something of a catch phrase for just that- and seems to be usually used these days to describe SSDs in all their permutations.
The MSFT/SNDK effort was announced publicly. When SSSS LLC was mentioned back in 2007 it was essentially a stealth venture with an unnamed partner. If the partner were MSFT, there would seemingly be no need to keep it quiet.
Then there is the slide from SanDisk’s 2007 Nasdaq 20th Investor Program presentation, that said:
“Solid-State Storage Solutions licensing entity formed: captures third party flash systems IP portfolio.”
It isn’t obvious to me why SNDK/MSFT would need a third party flash systems IP portfolio for software delivered on USB drives and cards. I can rationalize it, but that’s something else entirely.
If SSSS LLC were set up in an attempt to profit from licensing IP for SSDs, it would make perfect sense to try to leverage flash systems IP reinforced by a third party portfolio of such IP.
Following this logic, I’ve asked myself whether SiliconSystems might have been SanDisk’s mystery SSSS LLC partner? Lots of pieces fit.
There were close relations between the two companies. Each company was targeting different, but related markets targeting solid state storage solutions.
The problem is that I’m not confident that SiliconSystems patent portfolio measured up.
In SanDisk’s 12.04.07 Nasdaq 20th Investor Program presentation, Eli described “a partnership with another major owner of system level flash IP, [the partnership is] called Solid State Storage Solutions.”
While SiliconSystems had some patents, it would seem a stretch to refer to them as a “major owner of system level flash IP.”
In any case, it will be interesting to revisit that SSD vendor list over the next several years. In 2008, Samsung STEC and SanDisk accounted for over 56% of the SSD market. Intel at #4 had 6.9% of the market.
In acquiring SiliconSystems WDC bought its way into the top ten, but only picked up 1.7% of the SSD market, and this is in the enterprise space.
In 2011 when the consumer SSD market explodes, its going to be those who can deliver SSD performance at best prices, that will be sitting pretty and in a position to deliver the volumes required. This is going to take MLC systems expertise combined with in-house (or guaranteed) NAND supply.
Samsung, Toshiba and SanDisk look like players. Intel, if they can stand the heat, could ante up.
Maybe I’m missing something, but it looks like the hard disk drive players, the incumbent consumer storage heavyweights, are in for a world of hurt. Picking up bit players like SiliconSystems might buy some time.
The insurmountable hurdle looks to be shaping up as in-house (or guaranteed) NAND supply.