Monday, June 29, 2009

Will (should) NetApp get acquired?

June 29, 2009 – While we wait for the outcomes of the proposed acquisitions of Data Domain (by EMC or NetApp) and Emulex (by Broadcom), why not turn back to the longest-running acquisition speculation in the storage industry: NetApp.

For some reason, rumors about a potential acquisition of NetApp have been around for almost as long as NetApp has been around. I never gave them (the rumors, not NetApp) much credibility because (a) I don’t see which vendor would benefit sufficiently from a (roughly estimated) $8 billion acquisition of the company and (b) NetApp looks like a real winner in standalone mode.

But I recently read a blog post from president and founder Dave Vellante that calls these suppositions into question (even though Dave’s conclusion is the same as mine: That NetApp will not get acquired).

Although NetApp is looking pretty good right now, as data centers collapse (in a positive sense) around converged networks, the eventual winners will be the vendors that have the deepest penetration into the whole IT stack; say, Cisco, EMC, HP, IBM and/or Oracle-Sun. Will a pure-play storage vendor be able to prosper in that scenario?

Here are a couple snippets from Dave’s blog, and a link to the full post:

“NetApp is a $3.4 billion company with 8,000 employees and a good balance sheet. But it’s a ‘tweener’ in the IT sector. Not huge like HP and IBM, but much larger than smaller pure plays like 3PAR and Compellent. In his keynote, Warmenhoven raised the question that he said he’s frequently asked: “Who is going to buy NetApp?” His answer is essentially “no one,” because no company wants to own or can afford to own NetApp.

The question we have is how much further can NetApp go? Are we witnessing a trend similar to the minicomputer days where the likes of Prime Computer, Wang Labs and Data General, while highfliers in their day, were big but not attractive enough growth prospects to be acquired (notwithstanding DG’s smart move to re-invent the company as a storage player and subsequently sell to EMC)?

Click here for the full post.

Friday, June 19, 2009

Virtual servers cause bottlenecks

June 20, 2009 – If you’ve moved beyond test/dev and into full production with your virtual server deployment, you’re well aware of the fact that as ‘VM sprawl’ creeps in performance goes down. And you’ve also probably figured out that in the majority of cases, SANs are the culprit.

In fact, in a presentation at the VMworld Europe show in Cannes earlier this year (no, I didn’t go), Scott Drummonds, VMware’s group manager, technical marketing, said that 90% of the performance problems in VMware environments were SAN-related.

In researching an InfoStor Special Report on SAN management in virtual server environments, I checked with some industry analysts and end users and that percentage may be closer to 70%, but nevertheless it’s clear that in order to maximize performance of virtual server farms you have to maximize storage performance.

But first, you have to monitor and analyze performance across your entire virtual infrastructure, particularly the SAN fabric. In researching the Special Report I came across some tools that you should look into before you actually try to tune your environment, because “you can’t optimize what you can’t measure” as the folks at Virtual Instruments say.

Those tools include Akorri’s BalancePoint, NetApp’s SANscreen VM Insight, and Virtual Instruments’ VirtualWisdom (which is based on the company’s NetWisdom and is currently in beta, with general availability slated for the fourth quarter).

The Taneja Group research and consulting firm refers to these products, and others, under the umbrella term ‘virtual infrastructure optimization, or VIO.’ These cross-domain monitoring and analysis tools provide very deep visibility into the virtual infrastructure, with an emphasis on performance analysis and optimization recommendations.

I spoke to SAN administrators that were using some of these tools and I’d highly recommend at least taking them for a test drive if you’re having any performance problems in your virtual server implementation.

Also check out a recent Webcast, archived at, titled Eliminating the I/O bottleneck that limits scalability in today’s virtual servers. The main presenter was Greg Scherer, Neterion’s CTO, and although it does have some Neterion-specific content it’s an excellent look at I/O issues that often crop up in virtual server environments.

That Webcast was the first in a four-part series on Virtual Servers and the Impact on Storage, brought to you by InfoStor and our partner, Virtual Strategy Magazine.

The next Webcast in this series is coming up fast: On Thursday, June 25, 10:00a.m. PDT, 1:00p.m. EDT, we’ll host Virtual Servers: Six Ways to Reduce Your Backup Window. The key presenters for this Webcast will be executives from Vizioncore. To register, click here.

I’ll keep you posted on future Webcasts in this series.

Tuesday, June 9, 2009

Tucci woos Data Domain employees

June 9, 2009 – Maybe I spoke too soon in my last post about the fate of Data Domain when I opined that it was a done deal and that the dedupe darling would go to NetApp in spite of EMC’s bid (see “Stick a fork in Data Domain” ).

I speculated that NetApp would win out because (a) Data Domain is a better fit for NetApp than it is for EMC and (b) NetApp’s and EMC’s offers were the same: $30 per share. Not true. EMC’s is an all-cash offer and NetApp’s is a combination of stock and cash. And therein lies the reason why EMC could win: If you were a Data Domain shareholder, wouldn’t you want the all-cash deal?

Of course, there’s still the possibility of EMC or NetApp upping the offer, and investors seem to think that’s what will happen. (Data Domain shares closed at $32.58 today, virtually unchanged from last Friday.) Or NetApp could switch to an all-cash offer.

The latest development in this saga: Today, EMC chairman, president and CEO Joe Tucci sent an open letter to Data Domain’s employees (note: employees, not shareholders) trying to woo them over.

You can get additional details at EMC’s site, but here’s the text of the letter:

An Open Letter to the Employees of Data Domain

We at EMC have the highest regard for the people of Data Domain. You have built a terrific company. We know this because we have closely followed your fast-paced growth and progress for years. We understand the contributions your deduplication technologies and solutions are making to companies around the world. You have a well-earned reputation for attracting skilled storage professionals who excel at innovation. And we admire how uncompromising you are in caring for and serving your customers. In many ways, you remind us of EMC.

For these reasons and many more, we believe that bringing Data Domain into the EMC family would be the best way for you to continue building your careers and accelerating the success you've already achieved in the marketplace.

As you know, your Board of Directors has a fiduciary responsibility to do what is in the best long-term interests of Data Domain's stockholders. Looked at purely from a financial perspective, EMC's $30 per share all-cash tender offer to acquire all of the outstanding stock of Data Domain remains superior to NetApp's part-stock, part-cash offer. But of course there's more to the success of a merger than money can ever account for.

Therefore, we imagine that you must be asking yourselves, what kind of future could I expect to have as a member of the global EMC family? The short answer is a great and exciting future-and here's why:

For starters, EMC is a lot more than just the worldwide market and technology leader in storing, managing, protecting, and securing information-or, as we describe it, information infrastructure. We are also a company that truly knows how to acquire companies that have become leaders in their market segments, integrate them smoothly and successfully, and then empower them to excel. We have learned by doing, and our track record is considerable. For example, over the past six years in the Silicon Valley area alone, we have acquired 11 companies, and today we have about 6,000 employees in the region. We are very mindful of culture-respecting and preserving the various cultures that made the companies we acquired successful in the first place. In nearly every instance, after joining EMC, these businesses have grown faster, advanced the development of their technologies more rapidly, reached more customers, and provided greater career opportunities for their people than they had been able to do on their own.

One reason we've been successful is that EMC does not just have one culture but many, with common characteristics like respect, commitment to customers, and passion for innovation and winning. EMC doesn't acquire to consolidate. We acquire growth companies with great people and innovative technologies, and we invest in accelerating their success while their cultures continue to grow and develop. Many of the people in these companies have gone on to leadership positions in EMC, and we would expect the same potential from the talented people at Data Domain.

Our plan is to keep the people and products of Data Domain intact and operate your company as a product division within EMC. Your target-based deduplication technologies are important to the future of enterprise IT. We plan to invest in Data Domain and grow the business and the innovation even more aggressively because of our broader global reach and size.

How would you as an individual and your company benefit from EMC's resources and commitment to leadership? Not only are we deeply committed to our people and their development, we also have by far the largest storage-focused R&D budget in all of IT, which ensures a product-development pace that enables us to derive the vast majority of our revenues from products that are less than 18 months old. We are a truly global company offering opportunities for international experience, as nearly half of our employees work outside the U.S. We have consistently been ranked among the top global companies for training and development. We have a global sales and marketing organization of about 9,000 people in more than 400 locations around the world, complemented by a partner ecosystem that amplifies our strength, value proposition, and market reach. And we have ample cash and a very strong balance sheet to fund an exciting future.

Our collection of considerable strengths-along with our proven experience in successfully acquiring companies and empowering them to greater heights-should provide assurance that EMC can grow and develop Data Domain more rapidly and effectively than NetApp can.

At the end of the day, companies are really about people-committed, talented, passionate people who want to be challenged, who want to invent and create, do something meaningful and lasting, realize their full potential, make a positive impact on their communities and the world, and have fun doing it. That's exactly what EMC is about. The people of EMC are passionate individuals who get involved and make a difference in the lives of our customers and our communities every day. We stand for putting our customers first, treating people with respect, collaborating smoothly with our colleagues and partners, thinking creatively to solve problems, leveraging our diversity, and maintaining a fully inclusive workforce. And we stand ready to welcome the talented people of Data Domain to EMC with open arms.

Joe Tucci
Chairman, President, and CEO

I guess EMC is serious about this deal after all.

Friday, June 5, 2009

Stick a fork in Data Domain

June 5, 2009 – Ah, the perils of blogging about an unfolding story. In case you missed it, data duplication darling Data Domain appears to have accepted NetApp’s revised acquisition offer, following EMC’s hostile bid, which followed NetApp’s original bid. See Kevin Komiega’s blog, “Data Domain sides with NetApp,” for the latest news on this intriguing saga.

For reasons that aren’t entirely clear to me, both suitors are offering $30 per share yet NetApp’s deal has been valued at $1.9 billion and EMC’s was valued at $1.8 billion. I guess that has to do with the fact that NetApp’s is a cash-and-stock deal and EMC’s is a pure-cash deal. Which also explains why EMC honcho Joe Tucci considers his company’s bid to be “superior” to NetApp’s.

I think the saga is over, with Data Domain going to NetApp, but some financial gurus think EMC will up the bid even higher or, less likely, that a third suitor (Hitachi?) will appear.

The continuing surge in Data Domain’s stock price – to $32.51 today – suggests that investors expect an even higher bid, presumably from EMC.

Some bloggers have speculated that EMC never really wanted Data Domain, and that EMC made its offer just to drive the acquisition price up and stick it to NetApp. Does anybody really think that EMC is that frivolous? On the other hand, does EMC really need yet another deduplication option?

One problem with scenarios like this is that they set the blogging world on fire, with rampant guessing on what EMC (or NetApp) will do if it loses, or drops out of, the bidding war. Acquire another deduplication vendor? (FalconStor? Ocarina? Storwize?). I doubt it.

What has me scratching my head is the size of this deal: almost $2 billion (or more if the bidding war continues) for a technology that is a feature, not a market. Not to mention a feature that some vendors (NetApp and EMC) give away for free. How much margin will there be in this space once users expect the technology for free, or at least very inexpensively?

And just how popular is data deduplication? Sure, I’ve read all the (vendor commissioned) surveys that suggest that deduplication is the hottest technology in the storage market.

However, consider this: Apptio, which provides IT cost-optimization services among other things, is about to release the results of an end-user survey that says that storage is the next place IT organizations will analyze for cost savings. About 38% of Apptio’s customers are looking to reduce storage-related costs (which seems to me like an awfully low percentage). Of those companies:

--Almost 80% are analyzing tiered storage
--43% are analyzing low-cost archiving and backup options, including cloud storage
--And only 15% are considering data deduplication

According to Apptio’s PR agency, the company will be posting the full results of the survey on its Lean IT blog in the next week or so.

Monday, June 1, 2009

FCoE: The battle lines are being drawn

June 1, 2009 – From an end-user perspective, the battle for the brains (switches and adapters) of next-generation converged networks probably won’t heat up until at least next year. But from the vendor side of the fight, the battle lines are being drawn today.

In a storage-myopic view (which I’m usually guilty of), this could appear to be a battle between storage stalwarts such as Emulex, QLogic, Brocade and Cisco. Obviously, these vendors have an advantage on the Fibre Channel side of the equation. But if Fibre Channel over Ethernet (FCoE) prevails, the converged network of the future will be just as much, or more, of an Ethernet play.

In addition to younger companies that specialize in 10Gbps Ethernet (10GbE) adapters and are fervently working on FCoE – such as Chelsio and Neterion – keep your eye on the leaders in the Ethernet (including 10GbE) adapter market – Intel and Broadcom.

Which brings me to the latest turn of the screw in the Broadcom-Emulex acquisition saga.

I’ve blogged previously about this hostile takeover bid. See

Broadcom makes hostile bid for Emulex
Emulex to Broadcom: “Take a hike”

Most recently, Broadcom took its offer beyond the Emulex board, straight to the shareholders. In response, Emulex sent a letter to its stockholders urging them not to tender their shares, and not to consent to Broadcom’s related solicitation, which aims to ultimately remove Emulex’s entire board of directors and appoint in its place nominees hand-picked by Broadcom.

Until this acquisition clears up, or a white knight rides in, it may be too early to handicap the players in the FCoE space. But who do you think will prevail? If you don’t want to respond below, shoot me an email at