Milpitas chip company LSI Logic has agreed to buy Fremont, Calif.’s SiliconStor, a storage company, for $55 million, the companies said today.

SiliconStor had raised $12 million over two rounds since 2003, from VSP Capital, APV Technology Partners and individuals.

From the release:

SiliconStor provides storage technology focused on the SATA (serial ATA) and SAS (serial attached SCSI) markets and is shipping patent-pending products that improve the performance, reliability, and manageability of SATA drives when used in a SAS environment.

The acquisition of SiliconStor aligns with the LSI strategy to offer server and storage system customers complete solutions including IC (integrated circuit) controllers, ROC (RAID-on-Chip), expanders, RAID software, and HBAs (host bus adapters) for the fast growing SAS infrastructure.

With the addition of SiliconStor technology, LSI will be positioned as one of the only storage building block suppliers to offer a solution for all nodes in the storage systems architecture.

“As the demand for low cost, high-capacity storage solutions with reliable connectivity continues to grow, we are seeing a significant increase in the use of SAS and SATA disk drives in enterprise applications,” said Bill Wuertz, senior vice president, Storage Components Group, LSI Logic. “The SiliconStor acquisition, in combination with our industry leading line-up of SAS controllers, will enable LSI to offer a complete portfolio of interoperable SAS, SATA, and software building blocks.”

At closing of the acquisition, LSI expects to pay approximately $55 million in cash for SiliconStor. The closing of the transaction is subject to the satisfaction of customary closing conditions and is expected to occur in the first quarter of 2007.

(Originally posted 2/16)