NetApp secures future with $272m Decru buy

Encrypted vision

By Ashlee Vance, 16th June 2005

Cloud storage: Lower cost and increase uptime

Looking to add more muscle to its compliance pitch, Network Appliance has picked up secure storage specialist Decru for $272m.

The deal gives NetApp a strong maker of encryption appliances that can plug into storage networks using more traditional direct attached products or complex NAS (network attached storage) and SAN (storage area network) systems. NetApp plans to operate Decru as an independent business unit should the acquisition meet standard approvals and close by October, as expected. The purchase price is made up of about 80 per cent stock and 20 per cent cash.

"In an era where data is a precious asset and security threats to that data are accelerating, encryption is a key element of any data infrastructure," said Dan Warmenhoven, CEO of NetApp. "Recent, highly public mishaps point to the need for companies and governments to more effectively protect sensitive business, employee, partner, customer, and intelligence data."

Decru, founded in 2001 on the back of $45m in venture financing, boasts more than 100 customers. It has been shipping product for two years and has systems aimed at the SAN, NAS, iSCSI and tape markets. It can encrypt data being sent between systems and then archive encrypted data on disk or tape. Such a service could be valuable to customers looking to meet high regulatory compliance standards for protecting information.

NetApp and Decru have already partnered together to win a US Department of Defense contract. In addition, Decru claims the likes of EMC, IBM and Hitachi as allies.

Decru brought in just $6m in revenue last year but expects to post $8m, $9m and $10m in revenue in its next three quarters, respectively. It has enjoyed a recent boost from government and corporate customers using the encryption technology on their tape archives. NetApp is pleased with Decru's revenue prospects and with what it sees as a large technology lead over the competition.

"We think they have about a two-year headstart over the competitors,"Warmenhoven said.

"I think the price was fair . . . This was an expensive acquisition, but we think it's justified."

Close to one-fifth of Decru's current business is done in partnership with NetApp. Other strong partners include StorageTek, IBM and HP.

These close ties to some of NetApp's rivals raise obvious questions about whether or not Decru can still be seen as an almost independent player.

"We are committed to maintaining and extending those relationships after the acquisition closes," Warmenhoven said.®