Who could the big storage beasts be looking to buy?
Five companies hunt for acquisitions
Comment The big beasts of storage - Broadcom, Dell, EMC, HP and NetApp - are on the prowl, and could be looking for new targets to snap up.
EMC recently snared Data Domain, but is always hungry - NetApp missed out, so it must be still looking. Broadcom wanted to buy Emulex but couldn't, so is hunting again. Dell has a well-publicised acquisition strategy, and HP has just bought Ibrix, but has cash left in its wallet.
So three companies are definitely looking - Broadcom, Dell and NetApp - and then there are EMC and HP, who are also not averse to acquisitions. IBM might be casting about, but it has just changed its storage boss and is still developing its Diligent, XIV and FilesX purchases, which should rule it out for the time being.
Broadcom is different as it is looking for technology - Fibre Channel over Ethernet (FCoE) technology in particular - to safeguard and strengthen its Ethernet business. The two obvious candidates are Brocade and QLogic. Broadcom has a market capitalisation of $13.48bn and has just been forcefully rejected by a relative minnow, Emulex, with an MC of just $746.8m.
It has the financial firepower in principle to go after Emulex competitor QLogic, capitalised at $1.66bn. Alternatively, it could raise its sights and look at Brocade, which is a plumper animal altogether, what with its Fibre Channel switches and its Foundry networking. With a market capitalisation of $3.39bn, Brocade is more than twice as big as QLogic, but is still probably within reach. Our guess is that Mike Klayko would sooner have rats eat his toes than see Brocade bought, so Broadcom might be running QLogic figures through its spreadsheets.
We suggested that QLogic CEO H K Desai had no obvious successor fairly recently, and were told world-wide sales and marketing boss Scott Genereux had lots of relevant experience. It is not therefore likely that the Desai succession plan is for QLogic to be bought. Does Broadcom want another contested takeover? Probably not, so it might go and look elsewhere altogether if QLogic said no and Brocade was equally unwilling.
Dell has said it is looking for storage companies that could fill gaps in its portfolio, whilst strengthening its revenues and profitability. There are six possibilities in our list that its acquisitions chief, David Johnson, might be looking at.
First is Data Robotics, maker of the snazzy prosumer, SOHO/SME Drobo storage robot. The company has a highly attractive product, both in appearance and functionality terms, with its unique, for external storage, block storage technology.
With its Drobo Share NAS feature it would give Dell instant street cred against other external disk and small NAS suppliers such as Buffalo, La Cie, Iomega, Seagate and Western Digital.
Data Robotics is progressing like a runaway train, having just announced 100 per cent growth in world-wide sales over the second quarter of 2008. Sales were also 30 per cent higher than first quarter sales and the cumulative number of units sold reached 75,000. Recession? What recession?
Second up is ProStor and its RDX removable drive products. They come with backup software, are manufactured by Tandberg and Imation, and sold by Dell, Fujitsu, Fujitsu Technology Solutions, HP, IBM, NEC and Tandberg. Again the technology is unique and is being taken up by SMEs, as Dell well knows.
Who else makes the cut?
Third is Mimosa, the NearPoint archival software company. It is building a neat layered archive offering with separate data capture modules using a common archival platform layer which, in turn, reads and writes data from a physical storage layer. There is a possible services play - spec out and plan your archive - and Dell storage arrays would obviously fit in the storage hardware layer. (CommVault could be another software candidate in this general area.)
Fourth on our list is Panasas, the supplier of clustered file serving software for high-performance computing and other data-intensive environments. Dell has a strong presence in the supercomputer and HPC markets with its server blades and the ability to add a software dimension to this could increase sales value, and margin. There is a services play too, and Dell would have a technology it could use in the scale-out fileserver market, if that market reaches lift-off outside the HPC and media-rendering sectors
Number five is Nirvanix, the cloud storage startup. It has both API and NAS interfaces to its multi-national Storage Delivery Network. If Dell wants to participate directly in cloud storage services - rather than be content supplying storage hardware to cloud storage and general cloud service providers - then Nirvanix looks a good way in. Carbonite is another possible, as is Spare Backup.
Finally, there is Riverbed, the data acceleration company, which is building its business at impressive speed and has a good reputation. It has got an Atlas deduplication appliance in development which seems to have suffered a recent stall, but the main business seems solid and strongly growing. Like the cloud idea it complements Dell's existing business and there are service possibilities too.
Riverbed has a market capitalisation of $1.63bn, not being a startup like the previous suggestions, and would be, we'd suggest, an EqualLogic-like acquisition in size and prospects.
There are other possibilities that we rule out for Dell. Scale-out clustered NAS supplier Isilon has had troubles developing its company structure and is not yet in a healthy state after post-IPO missteps. This would be a company that would need treatment and development after an acquisition by Dell, and it's not clear there is a general need across Dell's market for the products Isilon offers.
Compellent's SAN products are selling into Dell's types of customers but Dell already has its Clariion and EqualLogic products there and it's not clear it has a SAN block-storage portfolio gap that Compellent could fill.
What about 3PAR? The InServe is a distinctly enterprise-class storage array with advanced thin-provisioning and ease-of-management features that would give Dell its own product to sit above the Clariions it OEMs from EMC. The firm has a $621.3m market capitalisation and a very good reputation. It is being subjected to an enterprise storage buying slowdown in the recession and currently making losses, which would lessen its attractiveness to Dell right now, so it might put 3PAR on a future possibility list for when the recession has ended.
Pillar Data might be a possibility if Larry Ellison's venture capital company would sell it. However, there is more overlap with the Clariion products than would be the case with 3PAR and so Pillar would seem to fail the Dell portfolio gap test.
Having opened the door to a non-FAS integration acquisition with the attempt to buy Data Domain, then NetApp might look at Compellent, 3PAR, Copan, and Riverbed. The latter would be outside its storage speciality but NetApp's channel could certainly shift a good few Riverbed boxes and Riverbed's channel could take NetApp products into places where they don't exist yet.
There are opportunities for integrating NetApp storage with Riverbed appliances and it looks to be a Data Domain class purchase with less overlap to NetApp's existing product range. If EMC doesn't want Riverbed then NetApp could have a clear run, assuming also that neither Dell nor HP are interested. For HP, adding in Riverbed to the ProCurve operation could look quite interesting. EMC must surely be thinking Riverbed looks both tasty and complementary to its existing products, if it wants to dip a toe into WAN acceleration waters.
NetApp might also cast an eye over 3PAR. Culturally there would seem to be a goodish fit and both companies compete with EMC. However, 3PAR's pure high-end block storage products would overlap a little with NetApp's FAS 6000s, and would also overlap with any coming new flagship NetApp product, making it not very complementary.
Compellent would overlap the bulk of NetApp's unified storage products and so also not provide a complementary product sale opportunity. Ditto Pillar Data.
Were NetApp convinced it needed a distinctly green offering for persistent or reference data, it could look at Copan. The firm is currently headless, having lost its CEO, Mark Ward, and the venture capital backers might be looking for an exit. It would give NetApp the greenest disk storage technology of all and it could be positioned as complementing NetApp's own products in the archival storage space.
Our ranking of these four possibilities is Riverbed first, followed by Copan, 3PAR, Compellent and Pillar Data.
Other acquisition candidates
Other possible storage acquisitions in general might include STEC for its SSD controller technology, Data Direct for its high-bandwidth block storage arrays used in movie special effects rendering type applications, and BlueArc for hardware-accelerated high-speed file servers.
We note that EMC does not have a scale-out NAS storage offering in the Isilon class and, if it thought such storage had a place in enterprise data centres, might have a look at Isilon. EMC could think that Drobo might find a home in its Iomega unit. HP might be looking at Nirvanix for enterprise cloud storage having dropped its SME Upline cloud backup offering.
We have no inside information or tips about any of the companies we have listed as possible acquisition candidates. None of them have said they are for sale or want to be bought, so we'll just have to wait and see whether any of our guesses hit the mark, or are way, way off. ®