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HP Simplivity buyout rumours: Could it be worth HALF a BILLION?

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HP is said to be in talks to buy Simplivity, a startup whose main offering is the Omnicube converged server/storage/networking systems.

The Omnicube is a so-called hyper-converged system, designed from the ground up to eliminate the data centre chaos of independent server, storage and networking products that have to be separately acquired, integrated and operated.

It is more cost-efficient, according to Simplivity and fellow converged system startup Nutanix, to buy and operate all-in-one unified boxes, or generation 1 converged systems built from separate components by EMC and Cisco’s VCE and converged system reference architectures like Cisco and NetApp’s FlexPod.

It is suspected that EMC has its own hyper-converged offering development.

Both Simplivity and Nutanix are growing strongly and their scale-out boxes could be used by both public and private cloud providers.

Simplivity’s history looks like this:

  • Founded in 2009 by Chairman and CEO Doron Kempel
  • $18m initial and then A-round funding in January 2012
  • Omnicube first shipped in August 2012
  • $500,000 debt financing in September 2012
  • $25m B-round funding in September 2012
  • Nvidia partnership for VDI in October 2013
  • $58m C-round funding in November 2013

Kempel was a founder of deduplication startup Diligent, bought by IBM for $200m in 2008, who crafted ProtecTIER products from its technology.

Simplivity’s total funding is $101.5m, and a 5x payout for investors suggests a buy price of around half a billion dollars would be on the table.

The logic of an HP Simplivity buy could look compelling – but that view from the back of a hack’s envelope would be of little use to hard-nosed M&A execs. HP’s last big acquisition, Autonomy, turned out badly and was painfully expensive, at $8.8bn and counting.

Simplivity would be a more affordable morsel in comparison, but HP, with its own storage, server and networking product business could build its own converged server/storage/networking system if it wanted. Buying Simplivity and replacing some of its components with its own would be a short cut to selling a converged system by HP.

Neither HP nor Simplivity commented on the acquisition rumour, first reported by trade mag CRN. ®

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