IBM Corp. and NetApp set the tone for a busy first half of 2008 for storage acquisitions when IBM acquired XIV and NetApp bought Onaro Inc. in the first three days of the year.
By the end of April 2008, EMC Corp. checked in with acquisitions of Iomega Corp. and Pi Corp., IBM added Diligent Technologies Corp. and FilesX Inc., Cisco Systems Inc. bought Nuova Systems Inc., and Blue Coat Systems Inc. picked up WAN optimization rival Packeteer Inc.
But the M&A activity slowed considerably in the second half of the year as the economy slipped. There were only three storage acquisitions after Overland Storage Inc. bought Adaptec Inc.'s Snap Server NAS business on the last day of June. Two of the deals were large – Brocade paid $2.6 billion for Foundry Networks in the most expensive storage acquisition of 2008, and Hewlett-Packard Co. paid $360 million for iSCSI vendor LeftHand Networks Inc.; however, smaller deals dried up. The only other deal in the last six months of 2008 was replication vendor Double-Take Software Inc.'s $9.6 million pickup of iSCSI target maker emBoot Inc.
Even with the late slowdown, there was no shortage of acquisitions that will have a big impact on the storage landscape in coming years. Here are the 10 biggest storage deals of the year:
Besides making the most expensive storage acquisition of the year, Brocade made it clear how important Ethernet is to the future of storage with this $2.6 billion move. The deal also puts pressure on Cisco by combining its primary Fibre Channel (FC) switch competitor with one of its leading Ethernet vendors.
Brocade bears closing watching in 2009 as it expands its product platform with internally developed host bus adapters (HBAs) and Ethernet products from Foundry, while preparing for the dawn of Fibre Channel over Ethernet (FCoE).
Besides the price, the Brocade-Foundry deal was notable because of how long it took to close. Brocade had problems with financing, renegotiated the price down from $3 billion to $2.6 billion, and finally closed the deal Dec. 19 – nearly five months after it was first disclosed.
This deal was likely a response to the biggest deal of 2007, Dell Inc.'s $1.4 billion acquisition of LeftHand rival EqualLogic Corp. In both cases, a server-storage player picked up a leading iSCSI SAN vendor that fit with the acquirer's small- and medium-sized (SMB)/small enterprise sweet spot. The difference was that HP paid one-quarter of what Dell put up for its iSCSI company. That's probably a sign of the economic times – EqualLogic was set for an IPO at the time of the Dell deal, while LeftHand didn't have that option in a dried-up IPO market.
IBM dropped approximately $300 million for a new-fangled block clustered system, setting in motion a guessing game about what it would mean for IBM's existing SAN array platforms. A year later, IBM's overall strategy remains unclear.
This was the easiest deal of the year to predict. Cisco funded Nuova from the start to develop its FCoE technology with an option to buy the startup. The Nuova crew also developed Cisco's MDS FC switch platform. The deal could be worth $678 million, depending on how much revenue Nuova products bring in.
Most major storage vendors filled their data deduplication dance cards this year, and IBM received its dedupe companion by acquiring Diligent for a reported $200 million. This was seen as the second half of a package deal, as Diligent and XIV were both founded by EMC Symmetrix lead developer Moshe Yanai.
NetApp saw Onaro as a door opener into Fortune 500 companies that have the biggest need for change management SAN software. This bears watching to see if NetApp gets more value out of Onaro than it did with previous acquisitions such as Spinnaker Networks Inc., Decru and Topio.
In a slow year for EMC acquisition-wise, the company still put up $213 million to win a bidding war for Iomega. With Iomega, enterprise storage giant EMC set up a Consumer/Small Business Products Division.
This deal was small by EMC standards, as Pi had no shipping product and 100 employees at the time. But EMC picked up the new VMware CEO (Pi founder Paul Maritz) in the deal, and combined Pi with Mozy to form its Decho Corp. cloud subsidiary.
This deal cost Overland Storage only $3.6 million, but it amounts to a lifeline as the struggling company tries to morph from a tape to disk vendor. Overland picked up the Snap product line from Adaptec, giving it a high-volume, low-end NAS business it will try to build upon to reverse years of losing money on tape.
In the latest example of consolidation in the WAN optimization space, Blue Coat gobbled up struggling Packeteer, which had previously gobbled Tacit Networks. Blue Coat hopes its new technology will help challenge market leaders Riverbed Technology Inc. and Cisco.