Emulex Corp., the Costa Mesa, Calif.-based maker of components for data center IT equipment has entered into a definitive agreement to buy the Silicon Valley fabless semiconductor company ServerEngines Corp. for more than $150m, including cash and stock. The buyer also plans to assume the seller's outstanding debt, including $25m owed to the buyer itself.

From the acquisition, Emulex will gain intellectual property for some of the seller's technology the buyer has been licensing to use in its own solutions, as well as new products, which the company expects to add $350m to the total size of the market it targets, Emulex VP of Corporate Marketing Shaun Walsh said. "It expands our market."

Besides solidifying Emulex's product-line roadmap by ownership of the intellectual property and expanding its market size, the deal will help "expand our footprint on the server motherboard."

The ServerEngines products that will work to that effect are the BladeEngine family of 10Gbps Ethernet ASIC's for LAN-on-motherboard (LOM) applications and the Pilot family of server-management controllers. The latter enable IP-based remote-management capabilities, including baseboard management control, graphics and KVM-over-IP for servers.

"This gives us a strong strategic footprint in those areas," Walsh said. "If you look at how I/O is managed in virtual servers, the closer you are to that physical infrastructure, the more opportunity there is to add value."

Baseboard management represents $150m in new market opportunities for Emulex and the LOM market represents the remaining $200m.

The company's existing products include Ethernet adapters, including FCoE CAN, NIC and iSCSI;Fibre Channel host bus adapters;embedded storage networking solutions;software applications for its adapters and software-development kits. Its key competitors are QLogic, Brocade and Broadcom. In 2009, Broadcom made a number of unsuccessful attempts to buy Emulex.

 Entry into the LOM market adds companies like Intel to its list of rivals.

Emulex currently sells to all major IT gear OEM's, including HP, IBM, Dell, EMC, NetApp, Cisco and Fujitsu.

The acquisition price includes about $78m in cash and eight million shares of Emulex stock. The company's shares were valued at $9.45 in the last trade on Tuesday, placing the total stock portion of the acquisition price at about $75.6m. An additional four million shares will be added to the price if the acquired business achieves certain goals by the end of next year.

Emulex is expecting to complete the deal in July, following approval from ServerEngines stockholders and successful meeting of other closing requirements.