Storage Soup

Jun 29 2011   1:12PM GMT

Oracle buys Ellison’s storage company, Pillar

Dave Raffo Dave Raffo Profile: Dave Raffo

Oracle CEO Larry Ellison today answered the question of what he will do with Pillar Data Systems, which he has invested hundreds of millions of dollars of his own money into. Oracle said it has agreed to acquire Pillar and will use its storage as its main SAN platform.

The Pillar deal is likely to be a big topic Thursday when Oracle executive president Mark Hurd and vice president of systems John Fowler host an Oracle storage strategy update that will be webcast.

In a letter to Oracle customers, Fowler referred to Pillar as a leading provider of SAN block I/O storage systems and highlighted its quality of service and scalable architecture. Fowler wrote that Pillar has nearly 600 customers running 1,500 systems, and boasted that the utilization rate of Pillar Axiom systems is about twice the industry average.

A presentation about the deal on Oracle’s website said Pillar Axiom will become one of four Oracle storage products dedicated to running Oracle software better. The others are Exadata Storage Servers for databases, ZFS Storage Appliances for NAS and StorageTek’s tape family.

Most of Oracle’s storage platform was acquired in the Sun deal, and Sun resold SAN storage from Hitachi Data Systems and LSI. After Oracle acquired Sun last year, Ellison said his company would concentrate on selling storage developed in-house rather than OEM products. It dropped its partnership with HDS for high-end SAN systems last year. It continued to sell midrange SAN systems from LSI, but during Oracle’s quarterly earnings call last week CFO Safra Catz said sales of the LSI systems dropped in the wake of NetApp acquiring LSI’s Engenio storage business. Pillar Axiom will likely replace NetApp Engenio systems as Oracle’s main SAN platform.

People in the storage industry have wondered about Pillar’s fate ever since Oracle bought Sun. Ellison’s venture firm sunk $150 million into Pillar to get it started in 2001 and put a lot more in to keep it running over the last 10 years. Pillar didn’t get products out the door until 2005, and it is unlikely that the company has ever run at a profit. An SEC filing by Oracle regarding the acquisition said Pillar owes Ellision “and his affiliates” about $544 million for loans and interest.

During the Oracle call last week, Ellison said most tech companies on the market now are priced too high to acquire.

“I think we’re able to grow through acquisitions when they’re attractively priced and they make sense,” he said. “They are by and large not attractively priced now and don’t make sense, so we’re not doing them. If these assets are wildly overpriced, we can’t make a good business case for buying them. Instead, we can focus our energies on organic growth.”

Oracle will pay nothing up front for PIllar but might have to pay Ellison and Pillar stockholders if Oracle makes a profit from the Pillar products over a three-year period from the date the deal closes.

In a blog today on Pillar’s website, Pillar CEO Mike Workman said he and PIllar president Nancy Holleran will join Oracle. “Pillar is now a critical component to the Oracle storage strategy,” Workman wrote.

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