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Dot Hill Systems Corp. (HILL) to Re-establish Foothold in Software Market with Strategic Asset Acquisition

Dot Hill Systems Corp. (Nasdaq: HILL) provides entry-level and midrange external storage solutions for OEMs and systems integrators (SIs). The company’s products are used by leading service and equipment providers, common carriers, technology and telecommunication companies, and government agencies.

The company today announced it will expand its offerings through the acquisition of RAIDCore and NAS (Network Attached Storage) intellectual property assets from Ciprico Inc. (Nasdaq: CPCI).

Dot Hill said the acquisition will position the company to serve the growing enterprise-class software RAID market. In the second quarter of 2008, more than 2 million servers were shipped, representing an 11.3 percent year-over-year growth. According to the press release, enterprise-class versions of RAID software are expected to become the market standard in the next three to five years.

“These products complement Dot Hill’s existing world-class line of entry-level and midrange external hardware storage arrays and have the potential to increase our margins and may allow us to leverage opportunities at new and existing OEM and system integrator partners worldwide. We believe the breadth of the offerings — from software RAID and NAS through general purpose and ruggedized carrier-class midrange systems — will strongly position Dot Hill in the marketplace,” Dana Kammersgard, president and CEO of Dot Hill stated.

RAIDCore is unique in that it uses today’s high-performance, multi-core-based servers rather than specialized hardware acceleration used in external RAID systems. This results in a cost-effective solution expected to expand Dot Hill’s market reach.

“Dot Hill has long been a leader in providing proven, scalable storage solutions to the OEM and systems integrator community,” Kammersgard stated. “The addition of the RAIDCore intellectual property and products and the Minneapolis-based engineering and support expertise will open new market opportunities for Dot Hill in the growing host-based storage arena on a worldwide scale.”

Per the agreement, Dot Hill will pay $2.35 million, less a credit back to Dot Hill, for the previously announced $225,000 debtor-in-possession loan to Ciprico. The deal also includes a $1 million unsecured, interest-free note maturing in March 2012, and subsequent payments of 6.67 percent of net revenues from the RAIDCore and NAS assets over the course of 42 months, not to exceed $2 million.

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