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Dell acquisition of EMC leads storage M&A in 2015

Dell's blockbuster $67 billion deal to buy EMC overshadows all M&A 2015 activity in data storage, rendering deals for SanDisk, Veritas and other vendors to also-ran status.

The historic $67 billion Dell acquisition of EMC, announced on Oct. 12, overshadowed every other merger and acquisition...

(M&A) in the data storage world in 2015 -- and any other year, too.

The offer by Dell's CEO and founder Michael Dell, MSD Partners and the Silver Lake investment firm marked the largest-ever transaction in the IT industry. That blockbuster deal and other storage-related M&A activity in 2015 signaled the deepening level of disruption in the IT industry. Public cloud providers have exerted pressure on long-established vendors; and new software-defined, hyper-converged and converged infrastructure models, infused with flash, have challenged the traditional model of networked disk arrays.

Dell will gain a controlling interest not only over EMC's enterprise storage assets, but also EMC's VMware business, which will remain a publicly traded company, as well as its Pivotal, RSA Security, VCE and other federated ventures. No other suitors emerged during the 60-day window in which they could make a better offer. The deal is scheduled to close between May and October in 2016.

In the combined company, Dell will bring to the table server and storage products targeted primarily at small and medium-sized businesses (SMBs), as well as small enterprises; EMC's diversified storage offerings will extend its market reach to the largest of IT organizations. Dell faces decisions about how to proceed with overlapping product lines, such as its SC Series, PS Series and EMC's VNX storage arrays.

Western Digital makes waves

The Dell acquisition of EMC relegated this year's other storage transactions to small-potatoes status by comparison. In any other year, Western Digital Corp.'s (WDC) $19 billion acquisition of SanDisk might have topped the list.

Noted for its hard disk drives (HDDs), WDC pushed into the flash market in a big way with its October purchase of SanDisk -- one of six major manufacturers of NAND memory chips. SanDisk is also a leader in solid-state drives (SSDs), and its portfolio includes PCI-based products through its 2014 acquisition of Fusion-io for $1.1 billion. SanDisk launched an InfiniFlash line of all-flash arrays in 2015.

Earlier in 2015, WDC's HGST subsidiary scooped up Amplidata, an object storage vendor, for an undisclosed sum. In 2014, Western Digital Capital invested $10 million in Amplidata, and HGST partnered with Amplidata to jointly develop its Active Archive platform.

WDC has been on a buying spree over the last few years, as it tries to become a bigger player in higher value storage platforms and systems. The company's string of acquisitions has included rival HDD vendor HGST for an estimated $4 billion, SSD maker sTec, all-flash array vendor Skyera, PCI-flash startup Virident Systems and flash-caching storage specialist VeloBit.

Seagate continues diversification

The other major HDD vendor, Seagate Technology, has also diversified its enterprise storage business through acquisition. Seagate spent more than $600 million on Dot Hill Systems in August, marking its second acquisition of a storage systems vendor in the last two years. In 2013, Seagate shelled out $374 million for Xyratex, a specialist in storage for high-performance computing environments.

Other Seagate acquisitions included Avago's LSI flash business in 2014 for $450 million, and EVault, which focuses on cloud data protection and disaster recovery, in 2007 for $185 million.

As 2015 drew to a close, Seagate sold off all of its substantial EVault assets to Carbonite for far less than it paid for them -- a mere $14 million in cash. Carbonite sells cloud and hybrid business-continuity products for consumers, and small and midsize businesses.

Another billion-dollar-plus storage deal

But the Carbonite-Symantec/EVault deal didn't mean that bargain-basement prices were the rule for data-protection transactions in 2015. The Carlyle Group in August announced plans to buy Veritas from Symantec for $8 billion in cash. Symantec had been planning to spin out Veritas, whose storage and server management offerings include the popular NetBackup product line.

Carlyle named IT industry veterans Bill Coleman as CEO and Bill Krause as chairman. Coleman was founder, chairman and CEO at BEA Systems -- an enterprise infrastructure-software vendor that Oracle acquired in 2008 -- and at Cassatt, an enterprise cloud software company that CA bought in 2009. He also held senior management positions at Sun Microsystems and VisiCorp. Krause is a Carlyle operating executive who was previously chairman, president and CEO of 3Com. Krause also serves as a board partner at Andreessen Horowitz and a director at Brocade Communications Systems.

Yet another backup-related acquisition in 2015 was Barracuda Networks' $65 million purchase of Intronis in late September to expand its channel reach. Intronis focused on data protection for managed service providers (MSPs), which, in turn, provide services to SMBs, and claimed nearly 2,000 MSP customers.

Major storage vendors add technologies

NetApp, IBM and Hitachi Data Systems (HDS) made deals to beef up their portfolios. NetApp closed out the year by acquiring all-flash array startup SolidFire for $870 million in cash and discontinuing work on its internally developed FlashRay product. The SolidFire acquisition gave NetApp a scale-out array aimed at cloud service providers and enterprises interested in deploying distributed cloud architectures. NetApp will also continue to sell all-flash versions of its FAS and EF Series arrays.

IBM added object storage vendor Cleversafe in October to bolster its hybrid cloud and archive strategies. The company said it would integrate the Cleversafe portfolio into his IBM Cloud business unit.

HDS picked up Pentaho in February to accelerate its "social innovation" strategy, which focuses on making optimal use of data from connected machines and sensors, otherwise known as the Internet of Things. The Pentaho deal gave HDS an open source-based big data integration and analytics software platform.

Also in February, Avago Technologies pushed deeper into enterprise storage with its acquisition of Emulex in an all-cash transaction valued at about $606 million. Emulex is noted for network connectivity products, including Fibre Channel host bus adapters for storage. Avago designs, develops and supplies a broad range of semiconductor devices that target wireless communications, enterprise storage, wired infrastructure and industrial markets.

More on Dell acquisition of EMC

Product overlap after Dell-EMC deal falls to midrange storage

Dell World attendees approve of EMC acquisition

CIOs re-evaluate their strategies in wake of Dell's EMC purchase

Citrix kicked off 2015 with the acquisition of Sanbolic for an undisclosed price. Citrix said Sanbolic's workload-oriented storage virtualization technologies would help to drive down the cost and complexity of Windows application delivery and virtual desktop infrastructure deployments. Sanbolic's software can distribute workloads across multiple locations and clouds, as well as ease provisioning and management. At the time of the deal in January, Citrix claimed more than 200 of its customers used Sanbolic to geographically cluster their XenApp and XenDesktop deployments.

One of the smallest storage transactions in 2015 was Imation's $7.5 million acquisition of Connected Data, an enterprise-focused private cloud sync-and-share company. Connected Data's founder and CEO, Geoff Barrall, who served on Imation's board, joined Imation as CTO. Imation named Bob Fernander as interim CEO and said it expected to complete its corporate restructuring in early 2016.

Also in 2015, in May, Barrall spun out low-end NAS vendor Drobo, another company he founded, from Connected Data. An investment group led by former BlueFin Technologies CEO Mihir Shah bought Drobo for an undisclosed sum. Shah's prior experience includes senior-level positions at Brocade and IBM.

NetApp closed out the year by acquiring all-flash array (AFA) startup SolidFire for $870 million in cash and discontinuing work on its internally developed FlashRay product. The SolidFire acquisition gave NetApp a scale-out array aimed at cloud service providers and enterprises interested in deploying distributed cloud architectures. NetApp will also continue to sell all-flash versions of its FAS and EF Series arrays. 

Next Steps

A look back at M&A activity in the storage industry in 2014

IT professionals share mixed feelings about Dell-EMC deal

Dell acquisition of EMC hit channel partners hard in 2015

Dig Deeper on Storage vendors

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