Dell today said it is serious about buying Compellent Technologies for $876 million. I guess it’s really serious if the companies already have a price.
Any storage acquisition under $2 billion seems like a steal these days and Dell has clearly been shopping for another platform to go with its EqualLogic iSCSI family. Still, this proposed deal raises some questions about Dell’s storage strategy:
Is Compellent that much different than EqualLogic? Sure, Compellent sells Fibre Channel SANs and EqualLogic is iSCSI only, but they target similar customers. Buying Compellent won’t give Dell a larger potential customer base than it already has with EqualLogic plus its OEM deal with EMC for Clarrion Fibre Channel SANs. And Compellent isn’t a replacement for the higher end 3PAR arrays that Hewlett-Packard outbid Dell for in September. “How does Compellent, which has been a repeatedly highlighted competitor of Dell/EqualLogic, address Dell’s desire to move into the higher-end storage market?” Stifel, Nicolaus & Co. analyst Aaron Rakers asked in a note issued to clients today.
Is this the end of the Dell-EMC relationship? That long-standing partnership took a hit when Dell bought EqualLogic in 2008 and another when it tried to buy 3PAR. EMC CEO Joe Tucci has talked about rebuilding the relationship, but only if Dell were serious. Buying another EMC competitor probably isn’t what Tucci had in mind as a Dell show of seriousness. You could argue that the higher end Clariion systems still give Dell something that it doesn’t get from Compellent, but does EMC still want to play ball with a company that has become a prime competitor?
One financial analyst said EMC and Dell will retain their uneasy relationship for now. “It’s obvious that the EMC-Dell relationship is getting worse,” said Kaushik Roy of Wedbush Securities. “But what choice does Dell have in the high end of the midrange? Compellent doesn’t go there. So I think Dell still sells some CX in the midrange.”
By tipping its hand on Compellent, is Dell making it more likely that another suitor will make a bid? And if so, who? Rakers raises the question of whether NetApp would be interested, but Compellent’s doesn’t fill any gaps in NetApp’s product line.
On the plus side for Dell, this takes it closer to becoming full-service storage vendor. Dell’s in-house storage portfolio now includes EqualLogic, Exanet’s clustered NAS IP, Ocarina’s data reduction technology, and its DX Object Storage platform. Compellent brings impressive software technologies such as Data Progression automated tiering, Dynamic Capacity thin provisioning, and Live Volume for migrating volumes across arrays. It will be interesting to see if Dell makes a play for its own storage software company, perhaps its backup software OEM partner CommVault.
From a business perspective, Dell will make more money from selling Compellent systems than it makes from EMC Clariion because it owns the products. This is obviously a key reason for Dell broadening its storage portfolio.
If the companies reach an agreement, it will be interesting to hear Dell’s responses to these questions and its plans for this new technology.
While the enterprise solid state drive (SSD) is still growing slowly and no method of using SSDs has moved to the forefront, Fusion-io CEO David Flynn said his company’s Flash-based PCIe cards are making a big splash in a handful of vertical markets.
“We’re growing like gangbusters on revenue and growing our headcount,” he said. “It’s like riding a rocket ship.”
Because Fusion-io is a private company, we don’t really know if the vendor had five times as much revenue in its fiscal year that ended in June as it did last year as Flynn claims. And we don’t know how much revenue that would be. But Fusion-io did have a customer go public today when financial services firm Credit Suisse said it is using Fusion’s ioMemory technology with its trading platform.
Flynn said Credit Suisse is a typical customer in some ways, but not others. He said Fusion-io has other top trading firms as customers but most won’t publicly admit it. Credit Suisse uses Fusion-io’s cards to improve the speed of its computers to determine what stock trades to make and to execute those trades. “People have been using us for trading for three years,” Flynn said.
But Flynn said financial services is only the third largest vertical market among Fusion-io’s customer base, behind Web companies and government agencies. The most commonly run applications are analytical and transactional databases that require caching tiers, messaging for financial transactions and unstructured text search.
“Awareness of SSD technology is maturing,” Flynn said. “We’ve been in production for three years and people are becoming more aware and comfortable with our technology.”
With that awareness and comfort comes more competition for Fusion-io. Vendors such as STEC and LSI, in partnership with Seagate, have SSD PCIe cards that compete with Fusion-io. And industry heavyweights Dell, EMC, IBM and Intel in October initiated a working group to standardize PCIe-based SSDs technology. Fusion-io is among that group, which underscores the value the industry is placing on PCIe SSD cards as well as the increased level of competition.
“They’re bringing PCI express to the drive bay and that’s an admission that we had it right from the start,” Flynn said. “People are recognizing that you have to get the legacy storage infrastructure out of the way if you want to tap into the true potential of NAND Flash. But they’re all three or four years behind us in getting product out.”
The latest external storage system revenue numbers are in from IDC and Gartner, showing that trends we saw in the first half of 2010 continued into last quarter.
Those include the rise of Ethernet in networked storage at the expense of Fibre Channel, and market share gains by NetApp and EMC at the expense of IBM, Hewlett-Packard and Dell.
According to IDC, Ethernet-based NAS and iSCSI SANs outgrew the market again in the third quarter of 2010. NAS increased 49.8% over last year and iSCSI jumped 41.4%. Those numbers compare to overall SAN revenue growth of 18.5% and an external storage increase of 19%.
EMC led the NAS market with 46.6% share followed by NetApp with 28.9%, according to IDC. Both vendors picked up share over last quarter. EMC is also in the process of acquiring clustered NAS vendor Isilon, which had 0.75% of the overall storage share last quarter.
Dell still leads the iSCSI market on the strength of its EqualLogic platform. Dell had 33.8% market share last quarter, well ahead of EMC at 13.8% and HP at 13.7%. Dell increased its iSCSI share from 32.9% in the second quarter.
In the overall vendor horse race, EMC kept its lead in external storage with 26.1% of the market revenue, followed by IBM at 12.9%. NetApp, which edged ahead of HP in the second quarter, stayed third with 11.6%. HP was fourth at 11.1%, followed by Dell with 9.1%
EMC and NetApp gained total share over the previous quarter and last year while the other three of the top five lost share. NetApp revenue grew a whopping 54.9% since last year while EMC grew 28.3%. HP had the lowest growth at 11.3% over last year. Maybe that’s why HP spent $2.35 billion to acquire SAN vendor 3PAR, which had 0.83% of the market last quarter.
IDC said total external storage sales for last quarter were $5.2 billion.
Gartner reported similar numbers, placing the total external storage revenue at $4.6 billion — up 16% from last year.
Gartner added Fujitsu to the list of vendors who outgrew the market, and shed more light on specific vendor successes and failures. Gartner’s top five was the same as IDC’s, and it listed Hitachi Data Systems, Futjitsu and Oracle/Sun as the next three leaders. Gartner said Oracle/Sun revenue declined 36.3% from last year, attributing it to Oracle’s ending the OEM deal Sun had with HDS for its 9000 high-end monolithic array platform.
Other information in the Gartner report:
While storage vendors are paying a lot of attention to object storage these days, a new report from Forrester Research points to limitations that make the technology the wrong choice for many organization’s storage requirements.
The report, “Prepare for Object Storage in the Enterprise, defines object storage as “Storage of data that is broken into distinct segments, each containing a unique identifier that allows for retrieval and integrity verification of the data.”
The report isn’t anti-object storage. It points out object storage systems’ value in the areas of massive scalability, greater custom control over data, the ability to reduce management and hardware costs, and its WORM and shared tenancy features. It also recommends object storage for certain workloads. But it also looks at the downsides that need to be considered before adopting an object storage system.
“Poor performance, high data change rates, capacity sprawl, and lack of standards will prevent object storage from becoming ubiquitous, but it has the potential to significantly improve storage economics, ease of use, and control when mapped to the right workloads,” wrote the report’s lead author Andrew Reichman.
The right workloads, according to the report, include archiving, cloud storage, Web 2.0 and imaging applications. In other words, you shouldn’t be using object storage systems for databases.
As for drawbacks, Reichman writes that object storage focuses on data movement, high scalability and automation but not performance. “Performance, measured in inputs/outputs per second (IOPS) is not the strong suit,” he writes. “Put simply, object storage is just not designed as a replacement for SAN storage, deployed where high transactional performance is paramount.”
He adds that object storage’s use of unique identifiers is “not the most efficient design for data that gets edited frequently.” So while it’s good for picture or audio files that usually aren’t modified after creation, it’s not so good for databases and collaborative files.
And while file system vendors follow consistent standards and formats, there is no standard for object APIs. “In the end, the benefits of objects may take a back seat to the consistency and familiarity of files, unless the industry can get together on standardization,” Reichman wrote.
The merger leaves two InfininBand vendors — Mellanox and QLogic, which is primarily a Fibre Channel HBA vendor. Both have their sights on Ethernet as well, as Voltaire did before Mellanox bought it today for $176 million.
Once the merger closes – probably early next year – the new Mellanox will be a more complete InfiniBand vendor. The deal combines Mellanox’s silicon and adapter cards with Voltaire switches and software. Voltaire already bought its switch chips from Mellanox.
Mellanox CEO Eyal Waldman said the two companies will combine product lines in late 2011. He said some of the vendors’ OEM partners and large customers actually requested a merger of the vendors. Mellanox and Voltaire have OEM deals with IBM, Hewlett-Packard, Dell, Oracle/Sun and other server vendors, and share enterprise customers including Shell, General Electric and Exxon.
Waldman said the growth of the combined companies will come from adding Voltaire software such as Unified Fabric Manager and Voltaire Storage Accelerator to Mellanox products. “Today they come on top of Voltaire’s systems, and in the future I hope they also come on top of Mellanox’s systems,” he said.
Mellanox and Voltaire were the largest survivors of the handful of vendors who sold InfiniBand devices, hoping that it’s low latency would help it catch on as a major network interconnect. But InfiniBand remains largely a niche player for high performance computing and companies that rely heavily on transactional data for trading. Over the last year, Mellanox had revenue of $149.5 million and Voltaire’s revenue was $67.7 million. QLogic, which got into InfiniBand by acquiring PathScale and SilverStorm in 2006, had $39 million of revenue from InfiniBand last year.
Today’s merger can accelerate Mellanox’s move into converged networks because Voltaire’s software can manage storage and 10-Gigabit Ethernet networks. Both vendors say their 10-GbE devices can support Fibre Channel over Ethernet (FCoE) as well. QLogic has the lead there, though, with FCoE adapters already on the market.
Waldman said Mellanox would keep Voltaire’s employees, bringing the combined headcount to around 700. Voltaire CEO and chairman Ronnie Kenneth will join the Mellanox board, pending shareholder approval.
A new object storage vendor has thrown its hat in the ring to compete as a cloud storage enabler.
Actually, it’s thrown its Ring in the ring.
Scality’s Ring technology is targeted at service providers looking to take on Amazon S3 in the cloud. Scality is concentrating on storing email first, with designs on other applications and enterprise customers down the road.
“In five years I see us in the enterprise market,” Scality CEO Jerome Lecat said. “Today enterprises are still on the learning curve. They ask a lot of questions, but are not deploying a major pool of cloud storage. But that will come.”
Scality’s DNA is in email storage. It spun out of European email management vendor Bizanga after Cloudmark acquired Bizanga last February. The spin-out was originally called Bizanga Store, but changed its name to Scality in June. Scality is based in France, but has an office in San Francisco.
Lecat said email is also a good fit from a technology perspective for Scality.
“Some applications are being re-written to work with object storage. Email is one of them,” Lecat said. “People have written connectors with Exchange to work in the cloud. We’ll target applications that have been optimized to work with object storage.”
Scality sets up a cluster – or a ring – of nodes on commodity servers, and each node manages its piece of the storage environment. Each node constantly monitors a small number of peers, and the system will automatically rebalance the load if a node is added or taken out. Store and receive requests go through “accessors” that use HTTP, REST, RS2, Zimbra, OpenXchange, or Dovecot to communicate with the application. Scality also developed an I/O daemon called BizIOD to communicate with storage hardware.
When a store or retrieve request comes, the accessor contacts one of the nodes on the Ring. Lecat said by using Scalitiy’s Distributed Hash Table algorithm, the assessor can find the Ring in one hop for a ring of 10 nodes, two hops for 100 nodes, three hops for 1,000 nodes and seven hops for 10,000 nodes. That means within three hops, one node can address 50 PB of storage with less than 20 milliseconds of latency on a Gigabit Ethernet LAN.
After the correct node is contacted, it passes the object to BiziOD, which places it on the storage hardware. The nodes decide what objects should get off-loaded to tier two storage, and handle retention policies. One BizIOD runs per piece of physical storage hardware, but multiple BizIODs can run on one Ring node. If a disk fails, it only impacts the associated BizIOD daemon instead of the entire Ring node.
Adding tier one nodes boosts IOPS for better performance, and adding tier two nodes increases capacity.
Lecat said one Ring node typically has between 3 TB and 7 TB of usable capacity. He said Ring will support unlimited file sizes in its next release, which could come by the end of the year.
“We believe we have faster performance,” Lecat said. “And we can handle policies deployed on storage itself. You can decide how many copies of data you want to keep, and the data can self-delete at the end of the archival period. We manage these things from the storage layer rather than the application layer.”
Lecat said Scality has seven customers, including European service providers Telent, Host Europe, ScaleUp, Dunkel and intergenia. Backup vendor CommVault also provides a connector to European-based providers who use the Scality Ring.
Scality is looking to expand its U.S. footprint, but that won’t be easy because it involves competing with object storage products from EMC, Hitachi Data Systems, Dell, NetApp/Bycast, DataDirect Networks, Caringo and Cleversafe.
Overland Storage is giving customers extra disk and tape storage for no charge as part of a holiday season promotion, while Nasdaq is threatening to bring the vendor a lump of coal for Christmas.
Overland initiated two promotions this week, offering customers an additional 4 TB when they purchase a 4 TB SnapServer N2000 NAS/iSCSI system and 1.2PB of free capacity if they buy an NEO 8000e 1.2 PB tape library.
Overland’s attempt to jumpstart sales with these promotions comes as the Nasdaq is threatening to delist the vendor from the stock exchange because it is not in compliance with the exchange’s minimum standards for shareholders’ equity, market value or income. Overland has until Dec. 31 to present a compliance plan to Nasdaq explaining how it plans to meet one of the minimum standards.
After receiving the compliance plan, Nasdaq can grant Overland an extension up to 180 days to accomplish its goals before it is delisted.
Overland faced a similar delisting threat last year and has a history of financial losses, including a $6.5 million loss last quarter on revenue of $17.6 million – a revenue decline of 9% from last year. Overland had $4.3 million in cash at the end of the quarter, but has since sold $4.2 million of stock to investors. Overland’s stock price opened today at $1.30.
The vendor has put together a new management team over the last year under CEO Erik Kelly, including CTO Geoff Barrall and VP of global sales and marketing Jillian Mansolf, and is trying t o rebound with its Snap and NEO platforms. However, two key executives who joined Overland in 2009 — Ravi Pendekanti and Chris Gopal – left this year.
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.”