Following a month of speculation, EMC today said it has agreed to acquire Isilon for $2.25 billion and pegged the scale-out NAS vendor’s portfolio as a key addition to its cloud storage strategy.
In the press release announcing the deal, EMC categorized Isilon and its Atmos object-storage platform as complementary platforms for managing “Big Data” in private and public clouds, and said the combined revenue will reach a $1 billion run rate by the second half of 2012.
EMC definite “Big Data” as “a term used to describe the massive amount of data produced by a new generation of applications in markets such as life sciences (e.g. gene sequencing), media and entertainment (e.g. online streaming), and oil and gas (e.g. seismic interpretation) to name a few.”
EMC clearly sees Isilon’s products as a different category than its Celerra platform, which supports mainstream NAS as well as iSCSI storage.
EMC said both companies’ boards have approved the deal, and it expects the acquistion to close by the end of the year.
EMC will pay $33.85 per share for Isilon stock, which is a 29% premium to Isilon’s Friday closing price of $26.29. That’s a high price, considering Isilon was barely profitable. Isilon reported $4 million in net income on $53.8 million in revenue last quarter, its most profitable ever. The $2.25 billion price tag suggests there may have been another suitor for Isilon, as was the case when Hewlett-Packard acquired 3PAR in September for $2.35 billion after winning a bidding war with Dell. The usual suspects — Cisco, Dell, HP, IBM, NetApp and Oracle – have all been mentioned in analyst reports as possible suitors for Isilon.
Perhaps anticipating claims that EMC overpaid for Isilon, EMC spokesman Michael Gallant included a reminder of EMC’s acquisition track record in the e-mailed press release on the Isilon deal.
“EMC has a long and highly successful track record of acquiring, integrating and growing leading IT companies, like Isilon (think Data Domain, VMware, Avamar, etc.),” Gallant wrote. “Since 2003, EMC has also invested more than $13 billion on more than 50 strategic acquisitions.”
Check SearchStorage.com later today for more on this acquisition.
Nirvanix picked up $10 million in funding this week and hired a new CEO, who said his new company’s biggest selling point is its sole focus is on cloud storage.
Nirvanix CEO Scott Genereuxsaid unlike competitors such as Amazon, EMC Atmos, Iron Mountain Inc., Microsoft and Rackspace, Nirvanix’s sole mission is to enable cloud storage rather than adapting legacy or storage or backup technology to the cloud.
“We have multiple petabytes under management worldwide,” Genereux said during an interview with StorageSoup. “I couldn’t’ find anybody else who had multiple petabytes of storage under management in the cloud. There are not a lot of companies that just provide a storage cloud.”
Nirvanix hosts and manages data in seven data centers around the world. Genereux said Nirvanix has more than 700 customers using its Storage Delivery Network (SDN), including including NASA and the National September 11 Memorial & Museum.
“Everybody else is putting the name cloud on everything, but Nirvanix is true cloud,” he said. “Most of what I see out there isn’t cloud. It’s like the old SSP [storage service provider] market, where you would put a product out there in the market that was the same product the customer could’ve bought. EMC does that with its VCE [vBlock] product, then you throw Atmos on it. The products we’re coming out with are file-system based with lower-cost disk. I believe that model works at a lower price point.”
Amazon is Nirvanix’s biggest competitor with S3 for storage and EC2, which provides compute services and drives data to S3. Again, Genereux said the difference for Nirvanix is specialization.
“S3 was built by developers for developers,” Genereux said. “We focus on high-end enterprise customers who expect enterprise grade service. We can supply bandwidth they need. Amazon is an Internet company. Amazon’s a big company and could dominate, but I think with its model it will struggle to grow in this market. We don’t sell movies from film companies, we host movies for film companies.”
Genereux’s resume includes executive positions with Hitachi Data Systems, DataDirect Networks and most recently as senior vice president of worldwide sales and marketing of QLogic. He said that experience will help him build relationships that Nirvanix will require to grow. It already has partnerships with backup vendors Symantec and CommVault, whose software provide connectors to SDN. Genereux said one of his main goals will be to build out the Nirvanix reseller channel.
Analyst Greg Schulz of Server and Storage IO points out that as the third Nirvanix CEO in less than two years, Genereux needs to bring stability to the company. And the new funding won’t hurt either.
“They need more money because that model as the host, you have to keep pouring money into it or get acquired by somebody with deep pockets,” he said. “It’s a tough market. Nirvanix has done well, it has an installed base and it’s always in the conversation. But it has to keep converting that into paying customers.”
Genereux replaces Jim Zierick, who became Nirvanix CEO in January of 2009 and will remain on the company’s advisory board.
Oracle this week made its first enhancement to the StorageTek Virtual Storage Manager (VSM) since it acquired Sun, adding a second disk tier option to the mainframe virtual tape library (VTL).
The StorageTek Virtual Library Extension (VLE) is a tier of 7,200 RPM SAS drives that lets the VTL scale to 3.5 PB of disk capacity. Previously, it supported 90 TB in one system and only Fibre Channel drives.
“We’re adding a second tier based on SAS,” Oracle tape product marketing manager Tom Wultic said. “It puts more scalability in the disk buffer at a lower price than Fibre Channel.”
The VTL extension also uses Oracle’s Solaris ZFS technology to provide Triple-Parity RAID-Z3, which Oracle claims allows five times more data reliability than RAID 6 systems from competitor IBM.
Wultic said Oracle is contemplating adding data deduplication to VSM, but isn’t sure it is necessary for mainframe systems.
“With the mainframe we expect to have lower dedupliation ratios, by nature of the product,” he said. “For example, mainframes don’t have tons of PowerPoint copies as you find on open systems.”
He also said there isn’t much demand for VTL on open systems and there are no plans to resurrect the open systems VTL platform that Sun sold using FalconStor software. Wultic said VTLs were necessary when disk backup first became popular because backup applications were developed for tape. But backup apps now work with disk as well as tape and file systems such as SAM-FS can handle archiving straight to disk.
“The time kind of came and went for open systems VTLs,” he said. “Application needs are different, so we have different ways of approaching it. For open systems, you have two use cases – backup and archiving. Backup applications used to be written for a tape image and not for disk. Over time, they saw VTLs pop up and said ‘we could do that,’ so major backup apps can now manage disk and tape. We see a trend of people using backup applications for disk instead of using a separate appliance.
“Archive applications are not written for a tape image, they want to see the file system. We have virtualization with SAM that presents a file system to those apps and has disk and tape behind it.”
Quantum has aggressively chased the data deduplication disk backup market over the past year with a complete product refresh of systems beginning with SMBs and stretching to the high end of the enterprise. Still, the vendor has yet to make a major impact from a sales perspective.
Quantum reported earnings of $168 million Wednesday, coming in near the low end of its previous guidance, far below Wall Street expectations and down from $175 million in the same quarter last year. Its disk and software (deduplication) revenue was $30.6 million, representing a small slice of that market.
While the numbers don’t provide a ringing endorsement of Quantum’s product line and strategy, it does show progress, CEO Rick Belluzzo said. Belluzzo prefers to compare revenue to the previous quarter than last year’s numbers that included revenue from an OEM deal with EMC that ended after EMC bought Data Domain. Belluzzo said Quantum’s branded (non-EMC) revenue rose $13.2 million sequentially and branded DXi sales increased 19% over last year.
Quantum’s largest system, the DXi8500, will begin shipping in the next few weeks.
“We’ve worked over the last six months to transition the business,” Belluzzo said. “There’s a lot of energy and excitement around these products.”
As for the results, he said, “Of course this isn’t good enough and it is where we have focused our investment both in terms of enhancing our product offering and building greater revenue or market momentum.”
Quantum’s data dedupe strategy is to position its DXi products as the major alternative to EMC’s market-leading Data Domain appliances and go after non-EMC customers. It is building its channel and industry partnerships around that plan.
“There are a lot of competitors out there, but when it comes to target-based dedupe, it quickly becomes data Domain and us,” Belluzzo said. “When a customer is building a system that’s optimized for deduplication and replication, Data Domain is always in the deal.
Quantum’s strategy has made it an ally of NetApp, although not implicitly. NetApp was left with a hole in its backup product line after EMC outbid it for Data Domain last year, and many in the industry thought it might turn to Quantum to fill that gap. NetApp hasn’t done that with a direct partnership, but this week it said it is reselling Fujitsu’s CS800 S2 Data Protection Appliance in Europe and the Fujitsu appliance uses Quantum’s dedupe software. Belluzzo said Quantum is also working with NetApp channel partners to provide a dedupe alternative to Data Domain.
But there is no official partnership between the two vendors. “We have a good relationship with NetApp, especially in some geographies,” Belluzzo said. “It’s a little bit of best of breed of NetApp disk and our deduplication. It’s not uniform, or pushed at the highest level at NetApp, but it often happens at the channel level.”
Fujitsu this week disclosed that it was the dedupe OEM partner that Quantum talked about in January but couldn’t name. That was no surprise because Fujitsu started shipping its dedupe around that time, and its product description sounded just like DXi software. Belluzzo said Fujitsu won’t make up for the lost revenue from EMC, though.
“It isn’t an EMC-like agreement, that’s for sure,” he said.
Compellent is preparing a major refresh of its SAN systems by the end of the quarter, CEO Phil Soran said Tuesday on the vendor’s earnings report conference call.
Soran didn’t give specifics on the launch, but called it “the largest, most comprehensive hardware and software release in our company history.” He said the next version of Storage Center will increase performance and scalability, but will be based on Compellent’s existing architecture.
The release is noteworthy because Compellent hasn’t done much with its storage system hardware since it first rolled out Storage Center in 2004. The vendor’s strategy is to keep adding software features, such as the Data Progression automated tiered storage application, Dynamic Capacity thin provisioning and Remote Instant Replay remote replication. Soran said there will be software enhancements too for the upcoming system, including the Live Volume data migration application the vendor previewed last year.
“Over the next few quarters you’ll see a series of new product releases that … will provide enterprise data centers greater performance, scalability, efficiency, ease of use and reliability, and all will be based upon our existing virtualization and dynamic block architecture,” Soran said of the upcoming product launches.
The new systems will come as Compellent faces additional competitive challenges. Hewlett-Packard’s acquisition of 3PAR has increased HP’s midrange product offering, and EMC is preparing a low-end midrange system that is expected to be sold exclusively through the channel, the same go-to-market strategy used by Compellent.
Compellent had strong results for last quarter, beating Wall Street expectations by a wide margin with revenue of $42.1 million for a 31% increase over last year.
If Isilon is for sale as many believe, then the scale-out NAS vendor’s most recent financial results likely made it more valuable to a suitor. The third quarter of 2010 was Isilon’s most profitable and it increased revenue 77% over last year.
But Isilon CEO Sujal Patel said his main focus is continuing the company’s recent product expansion and channel growth, and the only acquisitions he was willing to talk about involved Isilon as the acquiring company.
“We never comment on rumors and speculations,” Patel said when asked if Isilon had hired a firm to help facilitate a sale. “We are heads down executing on our business model, driving rapid technology innovation, building our business and taking share from legacy vendors.”
He did say Isilon might explore buying smaller companies to drive its product development. That would be a departure for Isilon, which has never acquired another company.
“We’ve begun to think seriously about smaller acquisitions that would be beneficial to our business,” he said. “They would be acquisitions complementary to our channel. But nothing in the near-term.”
Isilon has spent nearly two years expanding its product platform with systems and management software to make its storage more geared toward the enterprise rather than verticals such as media/entertainment and life sciences. Perhaps the biggest step was one that hasn’t driven many sales yet for Isilon – the addition of iSCSI announced in late August.
Patel said that could be the most significant product in Isilon’s history. “It makes Isilon suitable for block-based storage,” he said. “We’re taking a measured approach to get into the SAN market. More and more as customers get comfortable with the technology, they’ll look to extend us into managing Microsoft SQL and Exchange and Oracle.”
Another thing taking Isilon from a niche high-performance file storage product towards a mainstream enterprise system is its data protection and management software. Software made up 14% of Isilon’s revenue last quarter, up from 11% the previous quarter.
All these additions have made Isilon more competitive against traditional NAS vendors NetApp and EMC, who is reportedly leading the parade of Isilon suitors.
Isilon’s revenue of $53.8 million last quarter was up 19% from the previous quarter and helped the vendor record its third straight profitable quarter with $4 million of net income. Isilon raised guidance for this quarter to $59 million to $60 million, which would bring it to close to 60% year-over-year growth for all of 2010.
Isilon’s results and plans make it worth watching, whether it gets gobbled up by a larger vendor or stays independent long enough to continue its long-range strategy.
While Simpana 9 gained attention mostly for its source data deduplication and array-based snapshot features when it launched earlier this month, CommVault is also looking to increase its presence in compliance and e-discovery with the latest version of the data management suite.
The vendor set out to improve its information management capabilities in the new version by redesigning its Web interface for search (using Microsoft’s FAST) and overhauling its data mining, classification, records management, work flow management, role-level access and legal hold features.
CommVault calls the process Retention Lifecycle Management (RLM), which CommVault’s information access management director Simon Taylor compared to ILM for compliance.
When asked if Simpana was crossing into content management, Taylor said: “We are going in that direction. We are able to retain objects, and classify and virtualize them over time. We also move data across tiers to the cloud. It’s about better retention and access to information.”
Enterprise Strategy Group analyst Brian Babineau CommVault said has made it easier to search and classification information with Simpana 9 by adding search within search and automatically tagging data based on pre-defined criteria.
“CommVault has always been strong on the capture side,” he said. “[Simpana] could manage the data in a backup or archive workflow. Now, it’s made it much easier from the GUI to the actual information classification so you can navigate it. So now users can actually find data and take more action with it.”
He said the addition of templates that let users customize workflows also simplifies records management, but a key area to watch will be Simpana’s search performance.
“If you have existing rules in a content management and want to add email, you don’t have to connect email to your content management system, you can create a template in Simpana,” he said. “Of course, I think they will still be questioned on their search response times.”
Nobody knows if Isilon Systems will be the next storage vendor to get acquired, but it’s clear that Isilon executives want to be the next. The scale-out NAS vendor has hired a firm to explore a sale, and has been linked with just about every large storage vendor since Hewlett-Packard gobbled up 3PAR last month.
The New York Post last Friday reported EMC is in exclusive talks to buy Isilon for more than $2 billion. I don’t know about the exclusive and $2 billion parts, but it’s likely that EMC is interested in Isilon. So are other storage vendors, mainly because EMC and others have failed to either develop their own clustered NAS or successfully integrate the technology after acquiring it from others.
EMC took a shot with its Hulk and Maui projects, which turned into its Atmos cloud platform but not the type of scale-out NAS system that media and Web companies crave for their storage needs. NetApp acquired Spinnaker in 2003 and still hasn’t fully integrated its clustered IP into the DataOntap operating system. IBM created its own, brining out SONAS last February. It’s too early to say if that product is a success, but it figures prominently whenever IBM presents its storage roadmap. HP acquired PolyServe in 2007and when that didn’t work out, it bought Ibrix last year. HP also talks up its XP9000 platform based on Ibrix a lot these days. Dell acquired the IP of Exanet earlier this year, and plans to use it for clustered NAS and multiprotocol storage in combination with EqualLogic but has yet to bring it to market.
In a research note today, RBC Capital Markets analyst Amit Daryanani, suggested that much of the interest in Isilon could be defensive. In other words, vendors want to keep their rivals from buying it.
“We suspect EMC would be the most likely acquirer, as it lacks a storage platform with a single management platform and its Celerra-NAS platform doesn’t scale as efficiently as Isilon,” Daryanani wrote. “Plus, the harm this could do to NetApp would make the deal even more appealing.”
As for NetApp, he wrote: “We would not be shocked to see NetApp interested in acquiring Isilon as a defensive move to keep its unified storage advantage versus EMC. Also, an Isilon acquisition by any of the other suitors would harm NetApp’s revenue stream.”
Daryanani also mentioned Cisco, Dell, HP, IBM, and Oracle as possibilities but admitted Cisco and Oracle were unlikely to make a bid.
The feeling here is that HP and IBM are willing to go with their relatively new scale-out products rather than throw money at another option. NetApp probably won’t get into another bidding war with EMC after losing out for Data Domain last year. Dell might find integrating Exanet more difficult than originally anticipated, but Isilon’s technology is proprietary and does not work with other vendors’ storage. That would make it even tougher to integrate with EqualLogic.
That leaves EMC, which could position Isilon at its clustered NAS for high performance, rich media and web customers while clearing the way to consolidate its current Celerra NAS with its Clariion SAN platform.
One thing is clear: Whoever buys Isilon will be overpaying. That’s because any large vendor could have picked it up for a lot less money a couple of years ago instead of exploring other options.
Iomega is getting into high-performance Flash. The first step is a portable drive for consumers and SMBs it will begin shipping next month. The next step is adding solid state drives (SSDs) to its NAS platform.
That’s the plan laid out by Jonathan Huberman, president of EMC-owned Iomega. The vendor today launched the Iomega External USB 3.0 SSD Flash Drive that is about the size of an iPhone. The SSD device comes in capacities of 64 GB, 128 GB and 256 GB.
Huberman said the same form factor will be used for Iomega’s NAS soon. He doesn’t have a timeframe because the company has to make tweaks to optimize it for the SMB NAS devices.
“It will be the same flash and the same form factor,” he said. “We’re architecting our NAS stack now.”
Huberman said USB 3.0 support is the key driver for the external drive, as well as decreasing Flash prices. “Without USB 3, you miss a lot of the benefits of Flash because you’re capped by USB 2 performance,” he said. “And price points continue to come down. Historically, the price/value equation wasn’t attractive. Now it makes sense for our customer base.”
The External SSD Flash drive costs $229 for 64 GB, $399 for 128 GB and $749 for 256 GB.
EMC and Oracle shared a lot of headlines this week. Two days ago, EMC brought out its Greenplum Data Computing Appliance that will take on Oracle’s Exadata system. Then Thursday, the companies were linked by rampant rumors that Oracle is looking to buy EMC in a blockbuster deal.
Despite the speculation, it’s a lot more likely they will go on as competitors and in manay cases partners than they will merge into one company.
It’s hard to say exactly how the rumor got started. There was a note from a Wall Street analyst Wednesday speculating on companies that Oracle might buy. EMC was on that list of 12 companies, listed as a potential long-shot. Still, that touched off a spark among investors, who had probably been hearing whispers that Oracle wants more storage and is intereted in VMware. EMC owns more than 80% of VMware, but is unlikely to sell that valuable asset on its own.
“I don’t know who started this talk,” a Wall Street analyst who covers storage told me. “I am sure there are bankers pitching EMC to Oracle, even if that deal doesn’t make any sense. Usually the target leaks these things, but I’m pretty sure EMC did not leak or start the rumor.”
After all the big deals we’ve seen this year in technology, more credence is given to rumors than usual. But this deal doesn’t seem credible, for several reasons:
Too expensive – Most analysts say EMC plus VMware would be worth more than $50 billion. Oracle would have to finance at least two-thirds of that, and that might not be so easy to do these days.
Too complex – Integrating large companies always brings about a transition period where product development and sales take a hit. The bigger the company that gets integrated, the longer this period usually lasts. Oracle is just about finished with its Sun integration, is this a good time to start another?
Too much technology – Oracle has shown with Exadata and its recent ZFS Storage Appliance upgrades that its strategy is to sell storage specifically to make its databases run better. While EMC would make a case for its storage doing that, what about all of its other products? Does Oracle want EMC’s full backup, security, and content management platforms? It would have to pay for all those pieces whether they fit or not. It could sell off the parts it doesn’t want, but that just adds to the complexity of the deal.
If Oracle CEO Larry Ellison wants a broader storage portfolio than he got from Sun, he’s better off going for a smaller company such as NetApp. If he wants VMware, he’s probably out of luck.