Unlike Data Domain and 3PAR, clustered NAS vendor Isilon received a $2 billion-plus acquisition offer without benefit of a bidding way. EMC made the only offers for Isilon leading to the $2.25 billion deal it announced a week ago, according to documents Isilon filed with the SEC.
Isilon’s price apparently got a boost from its sales last quarter, however, as EMC showed renewed interest after Isilon’s Oct. 21 earnings report.
According to the filing, EMC representatives first approached Isilon last April to discuss an OEM deal and raised the possibility of an acquisition in August. EMC made its first offer of $27.50 per share Sept. 7. Isilon contacted other companies its executives thought might be interested in buying it and entered into confidentiality agreements with two companies but neither submitted an acquisition proposal.
Isilon turned down EMC’s offer anyway, and EMC increased its bid to $30 per share Oct. 2. Two days later, Isilon made a counter offer of $36 per share. EMC responded that it “might be able to support a price of $33.00,” Isilon repeated its request for $36, and CEOs Joe Tucci of EMC and Sujel Patel of Isilon agreed they would announce a deal during Isilon’s earnings call if they reached a deal by then. However, on Oct. 20 EMC informed Isilon it would not pursue a deal “at that time.”
The next day Isilon reported impressive strong third−quarter earnings of $53.8 million in revenues and $4.0 million in net income, and Patel said the vendor was moving ahead with future plans as a standalone company. At EMC’s request, negotiations resumed Nov. 1 and EMC offered $32.50 on Nov. 13. Isilon countered with a request of $35, and EMC made another offer of $33.85 or $2.25 billion. Isilon accepted that offer Nov. 14, and the companies announced the deal the next day.
There had been speculation that at least one other company bid for Isilon because of the price EMC paid, but one Wall Street analyst suspects Hewlett-Packard’s $2.35 billion buyout of 3PAR raised the price for storage acquistions.
“We believe EMC overpaid for the deal, but not in a desperate move,” Wedbush Securities analyst Kaushik Roy wrote in a note on teh deal last week. “We believe HP overpaid for 3PAR thereby setting a high bar for valuation, which EMC has now followed by overpaying for Isilon.”
In any case, Isilon came a long way in the three years since founder Patel took over as CEO following an embarrassing incident when the company had to restate earnings because of improper revenue recognition. Patel continued to invest in technology and boosted sales enough to finally make Isilon profitable at the start of this year.
As a vendor entrenched in niche markets such as gas and oil exploration and rich media, Isilon also built a close following with its customers. Some of those customers are nervous about whether EMC can do as good a job.
“I have mixed feelings,” said John Welter, vice president of technology at Calgary, Alberta-based North West Geomatics Ltd., and an Isilon customer since the early days. “I think it may be good for Isilon because now they can worry about the engineering and innovation side and less about other things that EMC can now look after for them.
“The concern I have is that EMC products – particularly Clariion and the low-end Symmetrix – are extremely conservative equipment. EMC’s products are built solid but there’s nothing revolutionary about them. Isilon is going down a totally different path on storage. Isilon built revolutionary storage. EMC’s products are on an evolutionary path rather than a revolutionary path.”
Welter said he is also concerned with how the deal may affect his relationship with Isilon’s sales team.
“After five or six years of know the sales director in this region, there’s a comfort level,” he said. “I’m a little concerned about what happens with that side, and will I have to start developing a new relationship? Relationship is important when you’re spending a lot of money on storage, and it’s the foundation of your business.”
IBM won the Supercomputing 2010 HPC Storage Challenge this week with a technology designed for signifcantly improvement performance of running analytics and queries for large data sets as well as cloud applications.
Developed at IBM Research Almaden, the General Parallel File System-Shared Nothing Cluster (GPFS-SNC) uses the Hadoop Distributed File System (HDFS) for what IBM calls “high availability through advanced clustering, dynamic file system management and data replication, and can even continue to provide data access when the cluster experiences storage or node malfunctions.”
Prasenjit Sarkar, master inventor for storage analytics and resiliency at IBM Research said the technology uses a distributed architecture where each node is independent and tasks are divided between computers. No node has to wait for another to perform a task. This removes bottlenecks associated with SANs because there is no single point of failure.
“The goal is to store large amounts of data as efficiently as possible,” he said. “This is an architecture for petabytes and even exabytes.”
He said the architecture includes enterprise features such as client-side caching, disk caching, wide area replication, and archiving.
Sarkar said he couldn’t talk about any product plans or roadmap for GPFS-SNC, but he said possible use cases include analytical queries, largescale data warehousing products and cloud computing where storage is accessed in parallel. GPFS is used in IBM’s SONAS scale-out NAS product and its Smart Business Compute Cloud, so the new architecture is likely to show up there. It’s also a candidate for IBM’s recently acquired Netezza data warehousing platform.
Last quarter was a rocky one for Dell’s storage business. Dell lost its protracted bidding war against Hewlett-Packard for 3PAR – upsetting its storage partner EMC – and its revenue growth for the quarter lagged the industry level despite strong sales of EqualLogic iSCSI SANs.
EqualLogic sales grew 66% year over year but Dell’s overall storage revenue only increased 7% to $543 million. Stifel Nicolaus Equity Research analyst Aaron Rakers points out that Dell’s 7% year-over-year growth in storage revenue compares to a percentage increase in the mid-teens across the industry. And while EqualLogic grew year over year to $164 million, Rakers said its sales dropped 4% from the previous quarter and Dell’s overall storage business declined 13% from the previous quarter.
Rakers’ estimates that Dell’s non-EqualLogic storage sales – mostly from EMC’s Clariion – decreased 7.4% year over year and 16.4% from the previous quarter. He pointed out that EMC midrange storage revenue rose 22% year over year and NetApp’s product revenue jumped 49% year over year last quarter.
“Dell’s results reflect a well-known fracturing of the Dell/EMC relationship [following] the Dell vs. HP bidding war for 3PAR,” Rakers wrote in a research note today.
EMC CEO Joe Tucci talked about the Dell relationship during EMC’s earnings call last month and again this week when discussing EMC’s acquisition of clustered NAS vendor Isilon, saying that the partnership has been damaged by Dell’s attempts to broaden its storage portfolio. Tucci also said the vendors are working to improve that relationship. The rift in the partnership began when Dell acquired EqualLogic in 2008 and widened when it try to add EMC competitor 3PAR.
Dell CEO Michael Dell said on his earnings call Thursday that “we have a 10-year relationship with EMC, and that continues to evolve. We’ll continue to work with them.”
But Dell also pointed out that his company makes more profit from selling its own storage, and will invest more money on storage products.
“There’s no question the portfolio of the business is shifting,” he said. “Profitability is increasing. If you look at our storage business, EqualLogic grew 66% and now is on a run rate of over $800 million. We have purchased Exanet to add CIFS and NFS file system capability and Ocarina to add deduplication and compression. We’re focused on growing our storage business.”
Startup BridgeStor came out of stealth today with a series of application-aware appliances that perform data deduplication, compression, encryption and thin provisioning for primary and secondary data.
BridgeStor’s first three devices are Application-Optimized Storage (AOS) for VMware, AOS for Backup Exec 2010, and AOS for Network Storage (iSCSI). The VMware and Network Storage appliances hold 30 TB of capacity and the Backup Exec box holds 20 TB but reduces data through dedupe and compression.
BridgeStor founder and CEO John Matze said he is planning other appliances, including those tuned for Microsoft Exchange, SQL, and SharePoint.
The appliances are 2U Hewlett-Packard severs with 10-Gigabit Ethernet connectivity that run on Microsoft Windows Storage Server. They encrypt data at rest and to transfer into the cloud, and support thin provisioning. The hardware is manufactured by Hewlett-Packard and runs on Microsoft Windows Storage Server.
“I like to say BridgeStor does for storage what Vmware does for servers,” said Matze, who previously founded Siafu Software (acquired by Hifn) and Okapi (acquired by Overland Storage). He also spent time at Veritas, Overland, Hifn and Exar after it acquired Hifn.
He most recently was at Exar. “I spun myself out of Exar to do this project,” he said of self-funded BridgeStor. But he also made a deal with Exar to OEM the chip that provides deduplication and encryption inside his AOS boxes.
Matze said BridgeStor will be focused on small- to medium-sized businesses (SMBs) because most of the data reduction competition is aiming at the enterprise. He sees a short-term opportunity in backup and “the long-term vision is to be involved with long-term movement of data into cloud.”
Pricing for the apppliances begin at around $20,000.
Violin Memory today rolled out caching software based on its acquisition of Gear6 assets, adding a NAS acceleration product to go with its Flash-based SAN memory arrays.
Violin’s vCache uses Gear6’s NFS caching software on Violin’s Flash Memory Arrays. The idea is to remove I/O bottlenecks from NAS systems by creating large memory pools that serve data faster. vCache expands from 1.5 TB to 15TB of useable cache and Violin claims it delivers over 300,000 NFS operations per second over eight 10-Gigabit Ethernet ports. vCache also supports features such as snapshots and deduplication on NAS systems.
When Violin bought Gear6′s assets in June, Violin CEO Don Basile said Gear6 failed to survive because it sold caching software on large expensive appliances. Violin is delivering the software on the 3u arrays it uses for its Flash Memory Arrays. Pricing starts at $40,000 for 1.5 TB of cache.
“Gear6 software was a treasure trove, but its hardware wasn’t as impressive,” Basile said.
“You can buy a small NAS head with low-price software and use cache to accelerate performance,” he said. “We can make the cache as big as you want. You can put it in front of mini arrays and mini servers instead of a filer upgrade.”
The vCache is Violin’s third product, joining the 3200 Flash Memory Array and the 3140 Capacity Flash Memory Array that uses cheaper multi-layer cell (MLC) Flash solid state drive (SSD) technology. Basile said the company has more than 50 customers, and AOL is using 50 TB of Violin Flash devices.
Analysts give Violin credit for expanding its Flash options.
“If Flash is good, then more Flash is better,” said Objective Analysis analyst Jim Handy, who sees vCache as a way to avoid buying extra servers to run databases. “If you have Oracle charging you $30,000 per processor for an annual license and you cut the processors in your systems by spreading the database across multiple servers, you cut cost by $30,000 for every server you eliminate.”
SSG-Now senior analyst Jim Bagley said vCache was a logical addition for Violin. “Violin already had a SAN appliance, and Gear6’s technology puts Violin in the filer front-end,” he said. “Gear6 was a nice pick up.”
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.