Fabrik buys consumer business of SimpleTech

SAN FRANCISCO Mon Feb 12, 2007 12:01am EST

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SAN FRANCISCO Feb 11 (Reuters) - Online multimedia storage provider Fabrik Inc. said on Sunday it bought the consumer product business of storage company SimpleTech Inc., aiming to create a personal digital media network for consumers.

The privately held start-up said it paid $43 million in cash for SimpleTech's consumer business, which includes flash memory cards and other products, and that the transaction includes the SimpleTech STEC.O brand name.

As consumers accumulate increasing amounts of digital content -- in the form of photographs, home movies, music and movies -- online storage is becoming more popular for keeping back-ups of that content in the event of a computer failure.

Fabrik, based in San Mateo, California and backed by Comventures and Intel Corp.'s (INTC.O) venture arm, will eventually introduce memory storage devices that are married to its online storage service, Fabrik founder Mike Cordano said.

"What I'll bring to the game is software, applications and services and integrate them into products," Cordano said in an interview, adding that he expects new products resulting from the acquisition over the next six months.

Fabrik's SimpleTech business will remain in Santa Ana, California, and the products being acquired will continue to be sold under the SimpleTech brand name, Fabrik said.

The new products will earn gross profit margins of up to 40 percent, up from the mid-teens for current SimpleTech products, because of the functionality Fabrik will add, Cordano said.

Cordano said the combination would allow Fabrik to provide a range of offerings to consumers and creative professionals to store and protect digital content, and then access it, share it and publish it from anywhere through various devices.

Fabrik -- which is currently profitable -- would add about 140 SimpleTech employees to its current staff of 20.

SimpleTech said it was changing its name to STEC and would continue to trade on Nasdaq under the symbol STEC.

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