Storage mergers and acquisitions (M&A) continued at a clip through 2006, from run-of-the-mill market consolidation deals, to technology additions, to completely orthogonal purchases that left many industry analysts scratching their heads.
Quality, not quantity, is what counts on this list. We're less interested in the size of the deal, or how many companies a vendor has acquired. We're more interested in how vendors chose to spend their M&A dollars and what this indicates for product development and market trends. Some of the best acquisitions of the year were software purchases in which a traditional storage player added important new functionality to an existing product line.
No. 1 -- Software, software and more software
Startups selling heterogeneous replication and continuous data protection (CDP) software cleaned up this year. As standalone technologies, these products pulled in plenty of punters, but the consensus among them has been that these functions need to be integrated into existing backup and replication products. The acquirers below are hard at work on this integration process.
No. 2 -- ISCSI rockets ahead
Microsoft's acquisition of String Bean Software Inc. in March was an important trigger for iSCSI adoption. It provided the company with iSCSI target software that turns a Windows file server into an iSCSI storage device. It lets OEMs build systems that support file and block storage while providing snapshots through Volume Shadow Copy Service (VSS). Hewlett-Packard Co. (HP) and Dell Inc. are selling systems based on this software and analysts expect these products to win the small to medium business market.
No. 3 -- SAN switching market consolidates
Settling years of speculation, Brocade Communications Systems Inc. finally acquired McData Corp. in August in an all stock deal valued at $713 million. The move brought together two longstanding rivals in a bid to compete more effectively with a bigger rival -- Cisco Systems Inc. The product integration details have still yet to be made official, but Brocade has been assuring users since the merger that none of the key McData products, namely its director switches, will be killed off any time soon. A "converged platform" around 10 GB technology is expected sometime in 2008, but Brocade has been thin on details about this.
Brocade made another bold move in March, buying file virtualization player, NuView Inc., adding to the company's steadily growing software business. Analysts have said Brocade's bid to diversify is a wise one, given Cisco's claws into the market, but its success will depend on its ability to build up new channels outside of its existing OEM partners.
Since these deals went down, Brocade's stock has steadily risen from $5.14 to a high of $8.98 at the end of November.
No. 4 -- Virtualization gets some action, finally
Acquisitions by QLogic Corp. and LSI Logic Corp. of virtualization "plug-ins" from Troika Networks Inc. (a chip) and StoreAge Networking Technologies (software that runs on a switch), as well as QLogic's acquisition of InfiniBand maker PathScale, could bode well for network-based storage virtualization that doesn't take a director-class switch to implement.
Analysts said at the time of the deals that the QLogic pickups point to products that can move data really fast while also applying intelligence to that data in the form of virtualization. LSI and StoreAge, meanwhile, could combine to "pool" Engenio Information Technology Inc.'s midrange arrays.
No. 5 -- Security grabs headlines
Symantec Corp. and Veritas (as well as NetApp and Decru Inc.) are saying, "I told you so!" EMC Corp. became the next big company to jump on the storage / security bandwagon as vendors everywhere revved their marketing engines to emphasize the importance of securing data.
EMC raised a stir among industry watchers (to say nothing of shareholders) when it shelled out $2.1 billion for security-token maker RSA Security Inc.. Even those who could see wisdom in the acquisition largely agreed that EMC had overpaid; those who didn't agree with the acquisition considered it a potential disaster. Meanwhile, EMC still hasn't filled in some integration gaps between other companies it acquired years ago -- Legato and Documentum, for example, though that has begun to change this year as well. Skeptics are wondering if EMC bit off more than it could chew.
But in the end, among the vendors at least, the consolidation of security and storage continues. Xiotech Corp.'s drop off the radar in late 2006, resurfacing as a compliance company after the acquisition of e-discovery software maker Daticon in January shows that consolidation could float some ailing ships, as regulations continue to tighten and federal data security statutes are just around the corner…
No. 6 – Archiving a problem
Backups are not archives -- this much the industry has agreed on over the last year and a half. But what are archives? How are they best implemented? Should the focus be on controlling the growth of data associated with certain applications, such as Exchange, or on legal discovery and compliance? What about file systems and databases other than email servers?
HP's acquisition of database archiver OuterBay was the most interesting in this category. OuterBay pares down relational databases while keeping the "relational" part intact through data stubs and stores the data in an XML "wrapper" so it can be accessed later, even if the original database application is no longer available. These are two factors that go a long way toward solving some of the issues with database archiving, as well as long-term retention of data.
Iron Mountain Inc., meanwhile, has been busy branching out from its traditional tape-handling business and adding online disaster recovery, and archiving startup LiveVault was a big step into the e-discovery, replication and disk-based storage market.
Finally, Zantaz Inc.'s acquisition of Singlecast adds not only search and indexing functions to its email archive repositories but also allows for the archiving system to take action on emails that might be inappropriate or subject to e-discovery. This is similar to a spam filter -- a further layer of automation for users with enough on their plate to manage as it is.
No. 7 -- Tape and disk drive makers consolidate
The big guys may be on to something when it comes to differentiating themselves through software, or it could just be a self-fulfilling prophecy. Either way, hardware was very clearly out of style in 2006 as tape makers Quantum Corp., Advanced Digital Information Corp. (ADIC), Tandberg Data and Exabyte Corp., as well as disk drive makers Seagate Technology and Maxtor Corp., banded together for survival.
No. 8 -- SATA explodes
Emulex Corp. acquired ASIC and firmware components maker Sierra Logic Inc. for $180 million in cash, and assumed debt and stock in late August.
Sierra Logic's embedded bridges and routers enable integration of low-cost SATA disk drives into Fibre Channel (FC) systems. Sierra Logic OEMs include Engenio Information Technologies Inc., Hitachi LTD, NetApp., NEC Corp., Sun Microsystems Inc. and Xyratex -- its market share in FC-SATA bridging is estimated at 85%.
Meanwhile, Emulex had been spearheading an effort to create a direct FC-SATA protocol through the T11 standards committee, but the acquisition suggested that either that effort wasn't going so well, or that SATA was heating up so much that Emulex felt the need to jump more aggressively into the market.
No. 9 -- WAFS take off
The remote and branch office became a major concern this year as data growth continued everywhere. Many organizations began to consolidate data storage both within the data center, as well as geographically and helping them serve files from a central location were some of this year's big winners in storage in the form of the WAFS companies. Networking vendor Packeteer snapped up Tacit Networks Inc. to add the capability to its product portfolio, and while it wasn't exactly an acquisition, Riverbed Technology Inc.'s initial public offering (IPO) was another seal of confidence on the market as a whole.
No. 10 -- EMC's other deals
The most interesting storage acquisition EMC made this year was probably Avamar Technologies, which adds deduplication to backup software and became the first dedupe IP to be folded into products from a major storage vendor.
Other EMC deals included: Internosis, Interlink , Authentica, NearTek, ProActivity Inc., nLayers LTD, all of which represented further steps in EMC's attempt to transition itself into a software company.
EMC drops $165M on dedupe firm Avamar
EMC acquires Microsoft services firm Internosis
EMC snaps up another Microsoft partner, Interlink
EMC acquires ProActivity
EMC acquires nLayers
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