January 3, 2011 -- I originally posted a Top Ten acquisitions list in September, under the assumption that after the blockbuster HP-3PAR buyout we may have seen the last of the big storage acquisitions for the year. Wrong. The storage industry capped a crazy year of M&A fever with the EMC-Isilon and Dell-Compellent acquisitions. With those additions, I had to knock off from the list a few of the relatively minor acquisitions of the year, including SolarWinds’ acquisition of Tek-Tools and Exar’s buyout of Neterion.
Here's my revised list of the Top 10 storage acquisitions of 2010, in ascending order:
#10: PMC-SIERRA – ADAPTEC
Throughout the 1990s, Adaptec was synonymous with SCSI, and had a lock on the SCSI controller/adapter market. The company reached its heyday when it racked up revenues of about $800 million in fiscal 2000. But Adaptec didn’t see the winds of change blowing.
PMC-Sierra acquired Adaptec this summer for a mere $34 million.
In addition to Adaptec’s technology and products, PMC acquired Adaptec’s extensive channel, where it is still strong in RAID adapters.
PMC-Sierra’s acquisition of Adaptec puts the company in even more intense competition with arch enemy LSI. Now PMC will compete in the channel with LSI at the board level, whereas previously the battle was fought primarily on the semiconductor front.
Related articles:
PMC-Sierra to buy Adaptec’s channel storage business
PMC-Sierra ships 6Gbps SAS controllers
#9: NETAPP – BYCAST
The terms of the NetApp-Bycast deal were not disclosed. According to our original article on the acquisition: “NetApp is advancing its efforts in the cloud storage market with the acquisition of Bycast, a developer of object-based storage virtualization software that turns multiple storage devices across geographically-dispersed locations into a single pool for storing fixed content data.”
See “NetApp to acquire Bycast for cloud storage software”
NetApp plans to leverage Bycast technology to go after markets such as digital media, Web 2.0, healthcare, and cloud services providers.
Bycast’s flagship product is its StorageGRID virtualization software. It will be interesting to see what happens to some of Bycast’s existing OEM deals, which include partnerships with IBM and HP.
#8: EMULEX – SERVERENGINES
Prior to acquiring ServerEngines, Emulex was in a dicey position: The company licensed critical technology, including 10GbE ASICs, from ServerEngines and that technology was key to Emulex’s (at the time) risky gamble of betting the farm on 10GbE (and going head-to-head with Ethernet giants Broadcom and Intel, in addition to long-time rival QLogic and others).
The position was dicey because a competitor could scoop up ServerEngines, thus pulling the rug from underneath Emulex’s strategy. Emulex paid a high price for ServerEngines, but there wasn’t any choice.
According to our original article on the acquisition: “Emulex will acquire ServerEngines for $78 million in cash and eight million shares of Emulex stock. Based on Emulex’s closing price of $10.11 last week, those eight million shares would translate into an additional $81 million, bringing the total to almost $160 million.”
But wait, there’s more: “In addition, Emulex will issue four million shares of stock if ServerEngines meets certain business objectives by the end of 2011. Emulex also agreed to assume ServerEngines’ debt, which is currently $25 million. As such, the deal could eventually exceed $200 million.”
See “Emulex to acquire ServerEngines”
The bet, and the acquisition, seem to have paid off. Emulex has racked up a number of OEM design wins for its 10GbE/FCoE/iSCSI converged network adapters (CNAs), including Dell, EMC, HDS, HP, IBM and NetApp.
ServerEngines was founded in 2004 by former Broadcom engineers that were previously with ServerWorks, which was acquired by Broadcom in 2001. In early 2009, Broadcom launched an unsuccessful hostile takeover of Emulex.
#7: DELL – OCARINA
Rumored to be in the $150 million ballpark, Dell’s acquisition of Ocarina came as a surprise to almost everybody, and (along with #6, see below) confirmed that capacity optimization (data deduplication and/or compression) of primary storage is The Next Big Thing.
According to my original blog post on this acquisition (see “Dell to acquire Ocarina for data deduplication”): “Until the announcement of its embeddable, OEM version of its software, Ocarina was known primarily as a vendor of data reduction technology for primary storage. But the embeddable version is applicable across the storage spectrum, from primary storage to backup and archive.”
I think Dell will initially leverage Ocarina’s technology in image-intensive, fixed-content applications on primary storage. That space is where, so far, Ocarina has made its mark, with large wins at companies such as Kodak. Dell will probably continue to resell Symantec, CommVault and Data Domain software where those companies’ technologies make more sense, or where customers demand it.
And in a related Top 10 acquisition . . .
#6: IBM – STORWIZE
This one had been rumored for weeks before IBM made it official, so it ranks low on the surprise factor but high on the industry influence scale. Even more than the Dell-Ocarina deal, and even more than NetApp’s evangelizing, IBM’s acquisition of data compression specialist Storwize put data reduction for primary storage in a top spot among Hot Storage Technologies.
Rumors put this deal in the range of $140 million.
Storwize’s data reduction technology differs from some of its competitors in that it is in-line, real-time compression, as opposed to data deduplication.
It’s certainly not an understatement to say that being acquired by IBM was the smartest thing Storwize did since changing its name from Storwiz.
The Storwize product line is now part of the IBM Real-time Compression business unit.
See “IBM to Buy Storwize for Real-Time Data Compression” on InfoStor partner site Enterprise Storage Forum.
#5: VISION SOLUTIONS – DOUBLE-TAKE
This one ranked high on the surprise factor and it also ranked high in dollars, being valued at $242 million.
That amounted to about $10.55 per Double-Take share. Double-Take went public in 2006 at about $11 a share.
Prior to the Vision Solutions announcement, it was well known that Double-Take was on the block, with vendors such as Dell and HP considered to be potential acquirers.
Vision Solutions specializes in data protection software for IBM systems, while Double-Take’s strengths are in backup, replication, disaster recovery and high availability software, primarily for Microsoft platforms.
See “Vision Solutions to acquire Double-Take”
#4: EMC – GREENPLUM
I never did find out exactly what EMC paid for Greenplum, a data warehousing and analytics specialist, but my (questionable) sources tell me that the acquisition payment would easily put the deal near the top of this list.
Greenplum claims more than 100 customers, including NASDAQ OMX, NYSE Euronext, Skype, Equifax and T-Mobile.
In addition to its massively parallel processing (MPP) Greenplum Database, the company has Greenplum Chorus, a cloud platform for collaboration and data sharing. Greenplum became the foundation of a new division within EMC’s Information Infrastructure business.
Greenplum is a nice fit with EMC’s cloud initiatives, but it also heats up the competition between EMC, Oracle, IBM and Sun.
See “EMC acquires data warehousing vendor Greenplum”
#3: DELL – COMPELLENT
This one may not be a done deal, but it’s pretty close so Dell’s “take-under” acquisition of Compellent takes the #3 spot on our list. The latest offer is $27.75 per share, which translates into about $960 million, or $820 million net of Compellent’s cash.
In a sense, Compellent is a consolation prize after Dell lost the bidding war with HP over 3PAR. Acquiring 3PAR would have solidified Dell’s position in high-end disk arrays, but Compellent fills out Dell’s mid-range (and slightly high-end) positioning.
It will be interesting to see how Dell positions Compellent’s disk arrays relative to the EqualLogic product line (which grew 66% in revenues over the last year), but it will be even more interesting to see what happens to Dell’s EMC reseller agreement.
#2: EMC – ISILON
EMC shelled out around $2.25 billion for scale-out NAS vendor Isilon Systems, net of Isilon’s existing cash balance. That’s an eye-popping amount of cash, particularly considering that Isilon was barely profitable, but market researcher IDC predicts that the scale-out NAS market will grow on average about 36% annually, reaching an estimated $6 billion in 2014.
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 officials 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.
Isilon wasn’t EMC’s only acquisition this year. The company bought Bus-Tech about a week prior to the Isilon announcement. Bus-Tech specializes in VTL technology for mainframe environments. The financial terms of the Bus-Tech acquisition were not disclosed.
See “EMC snaps up Isilon for $2.25 billion” on InfoStor partner site Enterprise Storage Forum.
#1: HP – 3PAR
By virtue of its price ($2.4 billion) and the drama of the bidding war with Dell (which started at $1.15 billion), HP’s acquisition of 3PAR was clearly the #1 storage acquisition of 2010.
The acquisition of 3PAR puts HP in a much better competitive position, but it will be interesting to see what happens to the rest of HP’s disk array lineup. Does the 3PAR acquisition sound the death knell for the venerable EVA line? And what will be the fate of HP’s reseller deal with Hitachi? Months after the acquisition was announced, we still have more questions than answers on this acquisition.
2010 wasn’t a record-setting year in terms of the number of storage acquisitions, but it certainly was a record setter in terms of the amount of money that was shelled out.
As we enter 2011, the big question is: Who will be acquired next? According to the financial analyst community, CommVault is the most likely storage vendor to be acquired, but other possibilities cited by financial analysts include (in no particular order) Xiotech, Brocade, BlueArc, FalconStor and NetApp.
Related article:
Top 10 Storage Predictions for 2011 (by Henry Newman, on Enterprise Storage Forum)
Showing posts with label Isilon. Show all posts
Showing posts with label Isilon. Show all posts
Sunday, January 2, 2011
Monday, November 29, 2010
VCs score big in EMC-Isilon deal
November 29, 2010 – Whenever there’s a blockbuster acquisition such as EMC’s $2.25 billion buyout of Isilon, it’s interesting to speculate about what the marriage will mean to customers and competitors. But one angle I never look into is what the acquisition means to the venture capitalists (VCs) behind the acquired company.
According to a blog post on The Wall Street Journal’s wsj.com, the VCs behind Isilon made out quite well (see “EMC-Isilon Deal Is Another Data-Storage Win for VCs”).
According to that article: Atlas Ventures and Madrona Group, which provided Isilon with its Series A funding in 2001, as well as Sequoia Capital, which led the company’s Series B funding, all held significant stakes in Isilon.
Atlas said it will reap $473 million from the EMC-Isilon acquisition, or 20X its initial investment.
Madrona will get more than 15X the $15 million it invested, or $225 million+, according to a Madrona representative.
Sequoia Capital (which apparently did not sell any of its holdings prior to the acquisition announcement), will score $394.4 million.
Isilon was founded almost 10 years ago by Sujal Patel. The company went public in late 2006 at $13 a share. Going public was rocky in the beginning, with shares falling about 50% in the first year. Isilon’s stock price kept sliding through 2008 and 2009, when investors such as Atlas and Madrona added to their holdings.
Under the terms of the agreement announced a couple weeks ago, EMC will pay $33.85 per Isilon share.
Read the full blog post at wsj.com: “EMC-Isilon Deal Is Another Data-Storage Win for VCs”
According to a blog post on The Wall Street Journal’s wsj.com, the VCs behind Isilon made out quite well (see “EMC-Isilon Deal Is Another Data-Storage Win for VCs”).
According to that article: Atlas Ventures and Madrona Group, which provided Isilon with its Series A funding in 2001, as well as Sequoia Capital, which led the company’s Series B funding, all held significant stakes in Isilon.
Atlas said it will reap $473 million from the EMC-Isilon acquisition, or 20X its initial investment.
Madrona will get more than 15X the $15 million it invested, or $225 million+, according to a Madrona representative.
Sequoia Capital (which apparently did not sell any of its holdings prior to the acquisition announcement), will score $394.4 million.
Isilon was founded almost 10 years ago by Sujal Patel. The company went public in late 2006 at $13 a share. Going public was rocky in the beginning, with shares falling about 50% in the first year. Isilon’s stock price kept sliding through 2008 and 2009, when investors such as Atlas and Madrona added to their holdings.
Under the terms of the agreement announced a couple weeks ago, EMC will pay $33.85 per Isilon share.
Read the full blog post at wsj.com: “EMC-Isilon Deal Is Another Data-Storage Win for VCs”
Thursday, November 11, 2010
Isilon stock volatility stabilizes, but acquisition speculation stays
November 11, 2010 – The bidding war between HP and Dell that ended in HP’s $2.4 billion buyout of 3PAR has sent a number of storage vendors’ stock prices skyward. One good example was Isilon.
Fueled by a combination of acquisition rumors and a stellar quarterly financial report (see “Isilon revenue up 77%”), Isilon’s shares hit an all-time high of $29.48 late last month. The 52-week trading range: a shocking $5.32 to $29.48.
More recently, shares of Isilon (NASDAQ: ISLN) seem to have stabilized, closing at about $26 today.
EMC was reportedly in deep and exclusive talks with Isilon regarding a buyout, with the New York Post reporting that deal was in the $2 billion neighborhood (where 3PAR lived). More recently, various reports said that the EMC-Isilon talks were either dead (because of the pricey neighborhood) or stalled. I’d bet on the latter.
Realistically, I don’t think that (the barely profitable) Isilon can get $2 billion+ from anybody. So I’d still say that EMC is the most likely acquirer.
However, assuming that EMC is out of the bidding, financial analysts cite the usual suspects as possible bidders: Dell, NetApp, HP, IBM and Oracle – usually in that order. However, a bidding war a la HP vs. Dell for 3PAR will be highly unlikely this time around, in part (as I’ve said before) Isilon’s technology is great but it’s a product line gap plugger rather than the game changer that 3PAR would have been for Dell and could be for HP.
Financial analysts such as Morningstar’s Mike Holt, on thestar.com, cite Dell as the most likely candidate to snap up Isilon. However, rather than take what would be sort of a consolation prize after losing its bid for 3PAR, I’m guessing that Dell heads in a different (non-storage) direction in its acquisitions. And besides, Dell has the Exanet technology.
Isilon’s clustered scale-out NAS technology would fit nicely into NetApp’s lineup, but NetApp has shed a lot of blood, sweat, tears and money integrating the Spinnaker technology, and acquiring Isilon would be a lot of expensive crow to eat.
With Isilon’s hiring of Qatalyst Partners (which shepherded the 3PAR bidding), it seems quite likely that Isilon will be acquired. Then again, given the company’s traction and recent earnings report, the Isilon could very well go it alone.
Related blog post: “Isilon revenue up 77%”
Fueled by a combination of acquisition rumors and a stellar quarterly financial report (see “Isilon revenue up 77%”), Isilon’s shares hit an all-time high of $29.48 late last month. The 52-week trading range: a shocking $5.32 to $29.48.
More recently, shares of Isilon (NASDAQ: ISLN) seem to have stabilized, closing at about $26 today.
EMC was reportedly in deep and exclusive talks with Isilon regarding a buyout, with the New York Post reporting that deal was in the $2 billion neighborhood (where 3PAR lived). More recently, various reports said that the EMC-Isilon talks were either dead (because of the pricey neighborhood) or stalled. I’d bet on the latter.
Realistically, I don’t think that (the barely profitable) Isilon can get $2 billion+ from anybody. So I’d still say that EMC is the most likely acquirer.
However, assuming that EMC is out of the bidding, financial analysts cite the usual suspects as possible bidders: Dell, NetApp, HP, IBM and Oracle – usually in that order. However, a bidding war a la HP vs. Dell for 3PAR will be highly unlikely this time around, in part (as I’ve said before) Isilon’s technology is great but it’s a product line gap plugger rather than the game changer that 3PAR would have been for Dell and could be for HP.
Financial analysts such as Morningstar’s Mike Holt, on thestar.com, cite Dell as the most likely candidate to snap up Isilon. However, rather than take what would be sort of a consolation prize after losing its bid for 3PAR, I’m guessing that Dell heads in a different (non-storage) direction in its acquisitions. And besides, Dell has the Exanet technology.
Isilon’s clustered scale-out NAS technology would fit nicely into NetApp’s lineup, but NetApp has shed a lot of blood, sweat, tears and money integrating the Spinnaker technology, and acquiring Isilon would be a lot of expensive crow to eat.
With Isilon’s hiring of Qatalyst Partners (which shepherded the 3PAR bidding), it seems quite likely that Isilon will be acquired. Then again, given the company’s traction and recent earnings report, the Isilon could very well go it alone.
Related blog post: “Isilon revenue up 77%”
Friday, October 22, 2010
Isilon revenue up 77%
October 22, 2010 -- Amid rumors that the company may be acquired (by EMC, in the ballpark of $2 billion), Isilon reported third quarter earnings yesterday. Revenue was up a whopping 77% vs. Q3 2009 -- $53.8 million vs. $30.5 million -- and up 19% vs. the previous quarter. Net income for the third quarter was $4 billion, which was 2x net income of $2 million in the previous quarter. That compares to a loss of $4.9 million in the same quarter a year ago.
But what really caught my eye was Isilon's gross margin of 63.5% in the third quarter, which set an all-time record for the company.
Isilon's revenue performance, coupled with the acquisition rumors, is why the company recently vaulted to the #1 position in my list of potential acquisition candidates (see "Who will be acquired next? And the Top 10 are . . .").
Isilon's shares (NSDQ: ISLN) are trading at $29.21 as I write this. That's up 115% over the last three months, and up 330% over the last year. That run-up is in part due to the mania surrounding HP's $2.4 billion buyout of 3PAR, but it's also due to just plain performance.
In the third quarter, Isilon earned $0.09 per share. That compares to analysts' estimates of $0.05 per share.
The company's market value is hovering around $1.8 billion, justifying the speculation that EMC may be willing to pay around $2 billion for Isilon.
In its earnings call yesterday, company execs raised their fiscal year revenue growth estimates to almost 60%, compared to their previous estimates of about 40%.
Isilon claims more than 1,400 customers, including heavyweights such as NBC, Eastman Kodak and MySpace. Approximately 37% of Isilon's revenue comes from the media/entertainment market, 16% from life sciences, and 11% from the Web/Internet vertical market.
Isilon is known primarily for its strengths in scale-out NAS, but the company recently added support for the iSCSI SAN protocol in its OneFS operating system, enabling both file (NAS) and block (SAN) I/O under a single file system and volume (although Isilon's storage systems do not support the Fibre Channel or FCoE protocols).
We'll keep an eye on those acquisition rumors, but even without the sales and marketing clout of a larger vendor Isilon seems assured of ongoing success.
Related article: "Isilon puts multiple tiers under one file system"
But what really caught my eye was Isilon's gross margin of 63.5% in the third quarter, which set an all-time record for the company.
Isilon's revenue performance, coupled with the acquisition rumors, is why the company recently vaulted to the #1 position in my list of potential acquisition candidates (see "Who will be acquired next? And the Top 10 are . . .").
Isilon's shares (NSDQ: ISLN) are trading at $29.21 as I write this. That's up 115% over the last three months, and up 330% over the last year. That run-up is in part due to the mania surrounding HP's $2.4 billion buyout of 3PAR, but it's also due to just plain performance.
In the third quarter, Isilon earned $0.09 per share. That compares to analysts' estimates of $0.05 per share.
The company's market value is hovering around $1.8 billion, justifying the speculation that EMC may be willing to pay around $2 billion for Isilon.
In its earnings call yesterday, company execs raised their fiscal year revenue growth estimates to almost 60%, compared to their previous estimates of about 40%.
Isilon claims more than 1,400 customers, including heavyweights such as NBC, Eastman Kodak and MySpace. Approximately 37% of Isilon's revenue comes from the media/entertainment market, 16% from life sciences, and 11% from the Web/Internet vertical market.
Isilon is known primarily for its strengths in scale-out NAS, but the company recently added support for the iSCSI SAN protocol in its OneFS operating system, enabling both file (NAS) and block (SAN) I/O under a single file system and volume (although Isilon's storage systems do not support the Fibre Channel or FCoE protocols).
We'll keep an eye on those acquisition rumors, but even without the sales and marketing clout of a larger vendor Isilon seems assured of ongoing success.
Related article: "Isilon puts multiple tiers under one file system"
Monday, October 4, 2010
Who will be acquired next? And the Top 10 are . . .
UPDATED October 21, 2010 -- Following HP's $2.4 billion acquisition of 3PAR, speculation continues to run rampant over which storage vendors will be acquired next. Whether it's a good thing or a bad thing from the perspective of end users, further contraction in the industry is inevitable as the largest IT vendors attempt to control the entire IT stack and the pure-play storage vendors plug the gaps in their product lines in order to goose revenue growth.
For the following list of the Top 10 storage acquisition candidates, I factored in the opinions of InfoStor.com readers, which I received after posting "The Top 10 storage acquisitions of 2010." Interestingly, the majority of the reader responses came from channel professionals -- VARs and integrators -- leading me to believe that channel pros are much more interested in mergers and acquisitions than are end users. I also factored in opinions from industry and financial analysts. And topped it off with my own misguided opinions.
(Note: The ticker symbol links below take you to that company's entry page on the InfoStor Market Index, which provides up-to-the-minute info on the company's stock as well as company- and competitor-related news.)
#1 -- Isilon
I don't understand why CommVault's (NSDQ: CLVT) stock jumped so high during the HP-Dell-3PAR bidding war, but it did. I guess it was because CommVault has been an acquisition speculation darling for years.
CommVault has done a great job stealing revenue from the big four vendors in the data protection space, in part because CommVault's underlying architecture is newer and designed better for rapid enhancements, as evidenced in the recent release of its Simpana 9 software (see "CommVault unveils Simpana 9").
Conventional wisdom on Wall Street has Dell (NSDQ: DELL) as the most likely suitor under the assumption that none of the leading backup/recovery vendors (EMC, Symantec, IBM, CA) would be interested in CommVault, but I'm not so sure about that. Any of those vendors would have to eat some crow if they acquired CommVault, but they might be better positioned for the long haul.
Another possible CommVault suitor: NetApp which, by the way, is the #4 storage software vendor -- ahead of CA and HP (see "The Top 6 storage software vendors").
In addition to the fact that many financial analysts put the company at the top of their storage acquisition target lists, CommVault earns the #2 spot on this list because I think the storage M&A focus is going to shift from hardware to software. And with CommVault, it's hard to argue with low debt, high growth and high margins.
#3, #4 -- Compellent, Xiotech
Isilon, Compellent and Xiotech have all been cited often as potential Dell acquisitions post-3PAR/HP. I doubt it, because Isilon/Compellent/Xiotech are gap pluggers rather than the game changer that 3PAR would have been for Dell. Isilon, Compellent or Xiotech don't give Dell the high-end array technology that would enable Dell to go up against EMC/IBM/Hitachi, although they would be good complements to Dell's EqualLogic line. On the other hand, any one of these disk array vendors would help Dell doff its "Dude, you're getting a Dell" image.
Given their technology differentiators, and the difficulty of being a relatively small player in the contracting disk array market, it's likely that one or both of these vendors will be acquired by someone.
Xiotech, which is not publicly traded and has a nice differentiator with its Intelligent Storage Element (ISE) technology, would be the least expensive buy in this category.
The question with Compellent is whether the company has enough differentiation from what the potential acquirers already have in their portfolios.
#5 -- Permabit
Earlier this year, Permabit introduced an "OEM embeddable" version of its data deduplication software. dubbed Albierio. The company seems to be off to a good start with its OEM strategy, having already racked up reseller deals with BlueArc and Xiotech (see "Data deduplication: Permabit finds success with OEM model").
As the last standing "independent" data deduplication player, Permabit could thrive with its OEM model, but in light of the IBM-Storwize and Dell-Ocarina acquisitions in the data reduction space I think Permabit is an attractive acquisition candidate. The company's focus now is on deduplication for primary storage, but there's no reason Permabit's technology couldn't be used across all storage tiers -- and that could be very attractive for some of the larger storage vendors that have a diverse mix of data reduction solutions in their portfolios. Of course, that assumes that a "one size fits all" approach to data reduction is the way the larger vendors want to go in this space.
#6 - Brocade
IBM has been mentioned most frequently as a potential suitor for Brocade. That might have changed recently with Big Blue's announcement that it plans to acquire Blade Network Technologies (BNT), making it less likely that IBM would go for Brocade.
BNT specializes in blade and rack Ethernet switches, so it's not an overlap with Brocade's business, but the IBM-BNT acquisition will still dampen speculation that IBM will scoop up Brocade. More likely, perhaps, IBM will go after Juniper Networks. (Both Brocade and Juniper are IBM partners and, making it even more interesting, Juniper is a BNT partner.)
If we take IBM out of the Brocade acquirer lineup, that would leave Dell as the most likely acquirer (although Dell is also tight with Juniper). But that goes to the heart of the question of whether Dell will, post-3PAR, try for another disk array vendor (Isilon, Compellent, Xiotech?), software vendor (CommVault?) or surprise everyone and light out into LAN/SANland via Brocade.
Making a Dell acquisition shift toward networking more likely, Dell recently hired a former Cisco exec -- Dario Zamarian -- to run its networking business. Assuming Dell turns to networking in its acquisition spree, it's a 50/50 bet between Brocade and Juniper, according to some Wall Street wags.
In an article posted on MarketWatch (see "Brocade targeted by M&A rumor mill"), Wedbush analyst Kaushik Roy was quoted as saying, "It makes a lot more sense for Dell to buy Brocade than IBM. With Dell, it's a no-brainer. If Dell has half of a brain, they should be taking Brocade out right now."
Then again, if Dell goes after Brocade (NSDQ: BRCD), they could wind up in another crazy bidding war with, say, IBM or Oracle. And Dell's been there, done that.
In addition to IBM and Dell, analysts have cited Oracle and Hitachi as possible acquirers.
#7 -- BlueArc
Hitachi Data Systems (HDS) has been mentioned as a potential suitor for BlueArc, but it doesn't seem to be in HDS' genes to take the acquisitions route. But HDS and BlueArc do have a tight relationship and BlueArc has some attractive technology differentiators.
# 8 -- FalconStor
Only one of our readers mentioned FalconStor as an acquisition target, and it was in the context of the company potentially being acquired by HDS or NEC, but FalconStor would be relatively inexpensive and the company has great technology (although not everybody knows it because FalconStor's software is often sold "under the covers" by its OEMs and resellers).
In addition to getting storage management and data protection software (VTL, CDP, data deduplication, replication, etc.) across a variety of product lines, an acquirer could put the hurt on a lot of competitors because, although a relatively small company, FalconStor's tentacles reach across a lot of vendors via its reseller deals.
The possibility of FalconStor (NSDQ: FALC) being acquired heightened recently with the resignation of ReiJane Huai, the company's CEO. In the wake of the resignation, FalconStor tapped Jim McNiel as interim CEO and president. Some analysts think that McNiel may be more open to acquisition than was Huai.
#9 -- Symantec
The latest rumors regarding Symantec centered on Microsoft as a potential acquirer (see "Is Microsoft Looking to Buy Symantec?" on InfoStor sister site eSecurity Planet).
However, that (unlikely) move would be more for Symantec's security product line, rather than its storage software, and would be in response to Intel's acquisition of McAfee.
Given the breadth of Symantec's product line, and the fact that the company would be expensive and is not a pure-play storage vendor, I put Symantec low on this list. I don't see Symantec being bought any time soon, if only because of the company's huge market cap.
#10 -- NetApp
Rumors about NetApp (NSDQ: NTAP) being acquired have existed as long as the rumors surrounding CommVault and Brocade have, maybe longer. I think the time to buy NetApp is long gone, but due to the persistence of the rumors the company still makes our Top 10 list.
I see NetApp more as an acquirer than a target. The problem with that (for NetApp) is that, if the IT market does contract down to five or six soup-to-nuts vendors, NetApp doesn't have a chance of making that list even if it does dip into its deep piggy bank to make some acquisitions. It's that logic that keeps NetApp on our Top 10 acquisition targets list.
One other company that occasionally comes up in acquisition conversations is Quantum. This would be for the company's data deduplication technology and products. However, an acquirer would also get Quantum's tape business, and I don't think any of the likely acquiring vendors is looking to add tape to their portfolio.
And in the Least-Likely-But-Often-Mentioned category of acquisition targets: EMC. The Wall Street Journal reported last week that Oracle may be eying EMC (see "EMC Shares Rise On Oracle Buyout Rumor"). Sure, that would fill in the Tier-1 storage hole in Oracle's portfolio and, more importantly, give them VMware, but I still think the Oracle-EMC acquisition speculation is ludicrous.
Related blog post:
The Top 10 storage acquisitions of 2010
For the following list of the Top 10 storage acquisition candidates, I factored in the opinions of InfoStor.com readers, which I received after posting "The Top 10 storage acquisitions of 2010." Interestingly, the majority of the reader responses came from channel professionals -- VARs and integrators -- leading me to believe that channel pros are much more interested in mergers and acquisitions than are end users. I also factored in opinions from industry and financial analysts. And topped it off with my own misguided opinions.
(Note: The ticker symbol links below take you to that company's entry page on the InfoStor Market Index, which provides up-to-the-minute info on the company's stock as well as company- and competitor-related news.)
#1 -- Isilon
Isilon scooted to the top of this list because of two recent developments: (a) The company hired Qatalyst Partners to solicit potential acquisition offers. Qatalyst was the advisor to Data Domain when EMC acquired Data Domain, and Qatalyst also shepherded the HP-3PAR acquisition. (b) The NY Post reported on Friday that EMC may be close to acquiring Isilon for about $2 billion (see "EMC in exclusive talks to buy Isilon").
Isilon is known primarily for its strengths in scale-out NAS, but the company recently added support for the iSCSI SAN protocol in its OneFS operating system, enabling both file (NAS) and block (SAN) I/O under a single file system (although Isilon's storage systems do not support the Fibre Channel or FCoE protocols).
In addition to EMC, financial analysts have cited Dell, HP and IBM (and, less likely, Oracle or Cisco) as potential acquirers of Isilon (NSDQ: ISLN).
#2 -- CommVaultI don't understand why CommVault's (NSDQ: CLVT) stock jumped so high during the HP-Dell-3PAR bidding war, but it did. I guess it was because CommVault has been an acquisition speculation darling for years.
CommVault has done a great job stealing revenue from the big four vendors in the data protection space, in part because CommVault's underlying architecture is newer and designed better for rapid enhancements, as evidenced in the recent release of its Simpana 9 software (see "CommVault unveils Simpana 9").
Conventional wisdom on Wall Street has Dell (NSDQ: DELL) as the most likely suitor under the assumption that none of the leading backup/recovery vendors (EMC, Symantec, IBM, CA) would be interested in CommVault, but I'm not so sure about that. Any of those vendors would have to eat some crow if they acquired CommVault, but they might be better positioned for the long haul.
Another possible CommVault suitor: NetApp which, by the way, is the #4 storage software vendor -- ahead of CA and HP (see "The Top 6 storage software vendors").
In addition to the fact that many financial analysts put the company at the top of their storage acquisition target lists, CommVault earns the #2 spot on this list because I think the storage M&A focus is going to shift from hardware to software. And with CommVault, it's hard to argue with low debt, high growth and high margins.
#3, #4 -- Compellent, Xiotech
Isilon, Compellent and Xiotech have all been cited often as potential Dell acquisitions post-3PAR/HP. I doubt it, because Isilon/Compellent/Xiotech are gap pluggers rather than the game changer that 3PAR would have been for Dell. Isilon, Compellent or Xiotech don't give Dell the high-end array technology that would enable Dell to go up against EMC/IBM/Hitachi, although they would be good complements to Dell's EqualLogic line. On the other hand, any one of these disk array vendors would help Dell doff its "Dude, you're getting a Dell" image.
Given their technology differentiators, and the difficulty of being a relatively small player in the contracting disk array market, it's likely that one or both of these vendors will be acquired by someone.
Xiotech, which is not publicly traded and has a nice differentiator with its Intelligent Storage Element (ISE) technology, would be the least expensive buy in this category.
The question with Compellent is whether the company has enough differentiation from what the potential acquirers already have in their portfolios.
#5 -- Permabit
Earlier this year, Permabit introduced an "OEM embeddable" version of its data deduplication software. dubbed Albierio. The company seems to be off to a good start with its OEM strategy, having already racked up reseller deals with BlueArc and Xiotech (see "Data deduplication: Permabit finds success with OEM model").
As the last standing "independent" data deduplication player, Permabit could thrive with its OEM model, but in light of the IBM-Storwize and Dell-Ocarina acquisitions in the data reduction space I think Permabit is an attractive acquisition candidate. The company's focus now is on deduplication for primary storage, but there's no reason Permabit's technology couldn't be used across all storage tiers -- and that could be very attractive for some of the larger storage vendors that have a diverse mix of data reduction solutions in their portfolios. Of course, that assumes that a "one size fits all" approach to data reduction is the way the larger vendors want to go in this space.
#6 - Brocade
IBM has been mentioned most frequently as a potential suitor for Brocade. That might have changed recently with Big Blue's announcement that it plans to acquire Blade Network Technologies (BNT), making it less likely that IBM would go for Brocade.
BNT specializes in blade and rack Ethernet switches, so it's not an overlap with Brocade's business, but the IBM-BNT acquisition will still dampen speculation that IBM will scoop up Brocade. More likely, perhaps, IBM will go after Juniper Networks. (Both Brocade and Juniper are IBM partners and, making it even more interesting, Juniper is a BNT partner.)
If we take IBM out of the Brocade acquirer lineup, that would leave Dell as the most likely acquirer (although Dell is also tight with Juniper). But that goes to the heart of the question of whether Dell will, post-3PAR, try for another disk array vendor (Isilon, Compellent, Xiotech?), software vendor (CommVault?) or surprise everyone and light out into LAN/SANland via Brocade.
Making a Dell acquisition shift toward networking more likely, Dell recently hired a former Cisco exec -- Dario Zamarian -- to run its networking business. Assuming Dell turns to networking in its acquisition spree, it's a 50/50 bet between Brocade and Juniper, according to some Wall Street wags.
In an article posted on MarketWatch (see "Brocade targeted by M&A rumor mill"), Wedbush analyst Kaushik Roy was quoted as saying, "It makes a lot more sense for Dell to buy Brocade than IBM. With Dell, it's a no-brainer. If Dell has half of a brain, they should be taking Brocade out right now."
Then again, if Dell goes after Brocade (NSDQ: BRCD), they could wind up in another crazy bidding war with, say, IBM or Oracle. And Dell's been there, done that.
In addition to IBM and Dell, analysts have cited Oracle and Hitachi as possible acquirers.
#7 -- BlueArc
Hitachi Data Systems (HDS) has been mentioned as a potential suitor for BlueArc, but it doesn't seem to be in HDS' genes to take the acquisitions route. But HDS and BlueArc do have a tight relationship and BlueArc has some attractive technology differentiators.
# 8 -- FalconStor
Only one of our readers mentioned FalconStor as an acquisition target, and it was in the context of the company potentially being acquired by HDS or NEC, but FalconStor would be relatively inexpensive and the company has great technology (although not everybody knows it because FalconStor's software is often sold "under the covers" by its OEMs and resellers).
In addition to getting storage management and data protection software (VTL, CDP, data deduplication, replication, etc.) across a variety of product lines, an acquirer could put the hurt on a lot of competitors because, although a relatively small company, FalconStor's tentacles reach across a lot of vendors via its reseller deals.
The possibility of FalconStor (NSDQ: FALC) being acquired heightened recently with the resignation of ReiJane Huai, the company's CEO. In the wake of the resignation, FalconStor tapped Jim McNiel as interim CEO and president. Some analysts think that McNiel may be more open to acquisition than was Huai.
#9 -- Symantec
The latest rumors regarding Symantec centered on Microsoft as a potential acquirer (see "Is Microsoft Looking to Buy Symantec?" on InfoStor sister site eSecurity Planet).
However, that (unlikely) move would be more for Symantec's security product line, rather than its storage software, and would be in response to Intel's acquisition of McAfee.
Given the breadth of Symantec's product line, and the fact that the company would be expensive and is not a pure-play storage vendor, I put Symantec low on this list. I don't see Symantec being bought any time soon, if only because of the company's huge market cap.
#10 -- NetApp
Rumors about NetApp (NSDQ: NTAP) being acquired have existed as long as the rumors surrounding CommVault and Brocade have, maybe longer. I think the time to buy NetApp is long gone, but due to the persistence of the rumors the company still makes our Top 10 list.
I see NetApp more as an acquirer than a target. The problem with that (for NetApp) is that, if the IT market does contract down to five or six soup-to-nuts vendors, NetApp doesn't have a chance of making that list even if it does dip into its deep piggy bank to make some acquisitions. It's that logic that keeps NetApp on our Top 10 acquisition targets list.
One other company that occasionally comes up in acquisition conversations is Quantum. This would be for the company's data deduplication technology and products. However, an acquirer would also get Quantum's tape business, and I don't think any of the likely acquiring vendors is looking to add tape to their portfolio.
And in the Least-Likely-But-Often-Mentioned category of acquisition targets: EMC. The Wall Street Journal reported last week that Oracle may be eying EMC (see "EMC Shares Rise On Oracle Buyout Rumor"). Sure, that would fill in the Tier-1 storage hole in Oracle's portfolio and, more importantly, give them VMware, but I still think the Oracle-EMC acquisition speculation is ludicrous.
Related blog post:
The Top 10 storage acquisitions of 2010
Thursday, July 22, 2010
Isilon stock soars on Q2 earnings report
July 22, 2010 – Who says that startups can’t crack the market-share stranglehold of the big boys? Isilon appears to be on its way to doing just that.
Isilon presented its Q2 earnings report today, highlighting quarterly revenue of $45.1 million, up 15% over Q1 revenue of $39.3 million and up a whopping 56% over the second quarter of 2009.
The apparent turnaround has once again put Isilon (NSDQ: ISLN) in the billion dollar club, with a market value of $1.06 billion.
The news boosted Isilon to the #1 spot in the InfoStor Market Index today.
At one point today the company’s shares were trading at $16.24, up almost 20%. This year, Isilon’s stock price is up about 125%.
It’s hard to believe that it’s been almost four years since Isilon went public, in September 2006, and it’s interesting to note that the company’s stock topped $27 back in those heady days (after an IPO opening at $13 per share).
You can get the full financial results in Isilon’s press release, but here a few key stats:
--Q2 net income was about $2 million, or twice what analysts had predicted and twice the company’s Q1 2010 earnings. That compares to a net loss of $3.7 million in Q2 2009.
--Gross margin was 62%, up from 57% in Q2 2009.
--Isilon execs are estimating fiscal 2010 revenue growth in the low-to-mid 40% range
And the company seems to be in hiring mode. Isilon now has 398 employees, an increase of 30 people vs. the previous quarter.
I’ve always thought that one of Isilon’s weaknesses was an over-reliance on a single vertical market -- media and entertainment, which is particularly well-suited to the company’s scale-out NAS architecture. However, Isilon seems to making inroads into the more general IT market.
In the second quarter, media and entertainment accounted for about 35% of the company’s revenue. However, revenue from mainstream/traditional enterprises accounted for 28% of its revenue, a figure that is steadily growing.
From what I hear, Isilon's success is in no small part due to its strengths in the virtual server space. Here's what one user emailed to me in response to my original post:
"They are killing it in the VMware market. Their VMware story for NFS is head and shoulders better than everyone else, at least from a management perspective.
"Just imagine, no LUNs or volumes. Which means no more spending half my day balancing VMs across LUNs and volumes. Presto, 1/2 of the stuff that blows about managing VMware goes away. I can vMotion storage whenever with no repercussions. I can take snaps and replicate at a file/dir level (i.e. VM level), and it is monkey easy to manage as a system. "
Look out, NetApp.
Related articles:
Isilon puts multiple tiers under one file system
EMC breaks Q2 revenue record
Isilon presented its Q2 earnings report today, highlighting quarterly revenue of $45.1 million, up 15% over Q1 revenue of $39.3 million and up a whopping 56% over the second quarter of 2009.
The apparent turnaround has once again put Isilon (NSDQ: ISLN) in the billion dollar club, with a market value of $1.06 billion.
The news boosted Isilon to the #1 spot in the InfoStor Market Index today.
At one point today the company’s shares were trading at $16.24, up almost 20%. This year, Isilon’s stock price is up about 125%.
It’s hard to believe that it’s been almost four years since Isilon went public, in September 2006, and it’s interesting to note that the company’s stock topped $27 back in those heady days (after an IPO opening at $13 per share).
You can get the full financial results in Isilon’s press release, but here a few key stats:
--Q2 net income was about $2 million, or twice what analysts had predicted and twice the company’s Q1 2010 earnings. That compares to a net loss of $3.7 million in Q2 2009.
--Gross margin was 62%, up from 57% in Q2 2009.
--Isilon execs are estimating fiscal 2010 revenue growth in the low-to-mid 40% range
And the company seems to be in hiring mode. Isilon now has 398 employees, an increase of 30 people vs. the previous quarter.
I’ve always thought that one of Isilon’s weaknesses was an over-reliance on a single vertical market -- media and entertainment, which is particularly well-suited to the company’s scale-out NAS architecture. However, Isilon seems to making inroads into the more general IT market.
In the second quarter, media and entertainment accounted for about 35% of the company’s revenue. However, revenue from mainstream/traditional enterprises accounted for 28% of its revenue, a figure that is steadily growing.
From what I hear, Isilon's success is in no small part due to its strengths in the virtual server space. Here's what one user emailed to me in response to my original post:
"They are killing it in the VMware market. Their VMware story for NFS is head and shoulders better than everyone else, at least from a management perspective.
"Just imagine, no LUNs or volumes. Which means no more spending half my day balancing VMs across LUNs and volumes. Presto, 1/2 of the stuff that blows about managing VMware goes away. I can vMotion storage whenever with no repercussions. I can take snaps and replicate at a file/dir level (i.e. VM level), and it is monkey easy to manage as a system. "
Look out, NetApp.
Related articles:
Isilon puts multiple tiers under one file system
EMC breaks Q2 revenue record
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