EMC’s $2.25 billion bid for Isilon exceeds expectations

November 15, 2010 – I was wrong. When I blogged about EMC possibly acquiring Isilon late last week, I guessed that EMC would indeed buy the scale-out NAS vendor but at a price considerably less than the rumored $2 billion. In fact, EMC’s bid came in at $2.25 billion today – which is surprisingly close to HP’s $2.4 billion buyout of 3PAR.

Some observers have speculated that the $2.25 billion suggests that there were other suitors involved. I don’t think so. I think EMC wanted to seal the deal without a bidding war, and $2.25 billion should do the trick.

EMC’s positioning of the deal was interesting. Predictably, the words “big data” and “cloud” came up a lot in EMC officials’ explanation of the deal, but so did the synergies between Isilon’s platforms and EMC’s Atmos platform.

According to EMC’s press release on the announcement: “EMC’s Atmos and Isilon’s solutions will offer customers a highly scalable, low-cost storage infrastructure for managing ‘Big Data.’ . . . EMC Atmos object storage provides the perfect complement to Isilon for massive globally distributed environments and object access to data for usages like Web 2.0 applications.”

EMC went on to estimate that the combined revenue from the Isilon and Atmos platforms will hit a $1 billion run rate during the second half of 2012.

EMC also emphasized synergies between Isilon’s clustered scale-out NAS platforms and systems/software from Greenplum, which EMC acquired earlier this year.

In short, all of these acquisitions are complementary, not internally competitive. Nice positioning, and in fact it’s true. It’s rare that a vendor can make acquisitions of these sizes without having to shake up its existing product lineup (which is what HP will have to do as it folds 3PAR’s systems into HP’s venerable disk array lineup).

Not surprisingly, the EMC-Isilon announcement sparked more acquisition rumors, but now vendors that play in Isilon’s ballpark are getting some attention, including BlueArc (to be acquired by long-time partner Hitachi Data Systems?) and Panasas, which is moving into more commercial markets (see “Panasas Pushes Scale-Out Storage Performance Envelope” on Enterprise Storage Forum).

If $2.25 billion seems like a high price to pay for a barely profitable Isilon, consider the fact that IDC predicts that the market for scale-out NAS will grow on average 36% per year, reaching $6 billion by 2014.

Related articles:

EMC snaps up Isilon for $2.25 billion (Enterprise Storage Forum)

Isilon revenue up 77% (InfoStor blog post)

NetApp overhauls product line, from arrays to OS (InfoStor news story)