Category: storage

Xyratex acquires Lustre IP from Oracle

Contact: Tejas Venkatesh, Peter ffoulkes

Xyratex has announced a fairly rare deal with the acquisition of some of Oracle’s assets. Specifically, Xyratex is picking up the intellectual property related to the Lustre file system from Oracle, which the database giant itself obtained as part of its Sun Microsystems buy. Having already made significant investments in Lustre-based high-performance storage systems, the move helps Xyratex stabilize the Lustre community, and thus strengthen its product strategy.

The deal is a natural fit for Xyratex following its purchase of Lustre-based file storage management systems vendor ClusterStor in November 2010. ClusterStor CEO Peter Braam, the original developer of Lustre, joined Xyratex as part of the transaction and remains with the company today.

Xyratex is trying to build a reputation for itself as a leading storage systems provider. To do that, the company is leveraging its expertise in high-performance storage systems, for which Lustre is an appropriate parallel file system technology. Xyratex generated sales of roughly $1.2bn for the 12 months ended November 2012. For its part, Oracle divests a business that it hadn’t been investing in anyway.

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Corsair acquires streaming audio systems provider Simple Audio

Contact: Tejas Venkatesh

Its IPO plans may not have materialized, but high-performance hardware designer Corsair is continuing to add to its product capabilities. In its first-ever acquisition, Corsair has reached for Simple Audio, a maker of streaming systems that enable consumers to remotely listen to music stored on computers and mobile devices. With audio being an integral part of gaming, the deal adds complementary audio products to Corsair’s stable of headsets, speakers and memory modules.

Corsair should also be able to use its worldwide distribution channels to drive sales of Simple Audio’s products. Terms of the transaction were not disclosed but the target described it as a ‘multimillion-dollar’ deal. According to a press release from Young Company Finance, which tracks and reports on early-stage high-growth companies in Scotland, Simple Audio generated about $2.1m in revenue for the nine months ended September 2012. The company only started selling its products in January 2012.

Corsair designs high-performance DRAM modules and other gaming peripherals for personal computers, with a focus on gaming hardware. The low-margin DRAM business accounts for more than two-thirds of its revenue. The company was on track for an IPO before pulling its paperwork in May 2012, citing poor market conditions. For the year ended March 2012, Corsair generated a top line of $480m, with a gross margin in the mid-teens.

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Violin does a bit of portfolio roundout ahead of expected IPO

Brenon Daly

Contact: Simon Robinson, Brenon Daly

Violin Memory has made a technology-and-talent play, adding GridIron Systems in what’s likely to be the last bit of portfolio roundout before the flash-based storage specialist goes public. The purchase of GridIron is part of Violin’s strategy to maximize its addressable market in the emerging solid-state storage space, and specifically allows it to accelerate the performance of applications residing on existing SAN storage systems at large enterprises and service providers.

Violin didn’t disclose how much it paid for GridIron but we have heard from market sources that it wasn’t much money. As we understand it, GridIron was heading toward a wind-down and Violin is merely picking up some key IP and personnel from the company. The target’s website has only a skeletal list of executives, without a CEO or CFO. A year ago, GridIron indicated that it had some 50 employees, but Violin is expected to take on less than half that number. We’ll have a full report on the transaction in our next Daily 451.

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A deal-maker departs Dell

Brenon Daly

Contact: Brenon Daly

The top dealmaker at Dell, David Johnson, has left the computer maker for buyout shop Blackstone Group. Johnson joined Dell in mid-2009 as SVP for Corporate Strategy after an acrimonious split from IBM, where he had worked for 27 years. In mid-2010, Johnson was also named head of Business Development, overseeing acquisitions and investments at the company that has been trying to expand beyond simply being a ‘box seller.’

Johnson’s arrival at Dell came at a time when the company, which was a late-comer to the tech market consolidation, had just started shopping. In his time at the Round Rock, Texas-based giant, Dell announced some 20 transactions with a tab of $10bn. The acquisitions got Dell into virtually every part of the tech landscape, including IT services (Perot Systems), security (SecureWorks, SonicWALL), networking (Force10 Networks), storage (Compellent, AppAssure) and infrastructure software (Quest Software).

However, the return on that spending has yet to show up. Dell is still shrinking. It will likely end fiscal 2013, which wraps at the end of this month, with sales of about $57bn. That’s some $5bn, or 8%, lower than the company’s revenue in its previous fiscal year. Again, that decline comes despite a not-insignificant addition of aggregate revenue from its M&A spree. (For instance, Quest, which Dell closed in late September, was generating almost $900m in annual sales when it was acquired.)

The lack of growth at Dell is the reason the stock is out of favor on Wall Street. Since mid-2009, when Johnson joined Dell, the company has lost almost 20% of its value while the Nasdaq has tacked on 75%. The market values Dell at slightly less than $20bn.

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Imation continues storage push with Nexsan acquisition

Brenon Daly

by Simon Robinson

Imation, a company perhaps best known for selling consumer CDs and DVDs, has announced that it has acquired 14-year-old storage systems specialist Nexsan for $120m in cash and stock. Though Nexsan has been seeking a buyer for some time, the company has a good-sized and well-established business serving SMBs and enterprises. Imation, which says the purchase is part of its own strategic transformation that has seen it focus on storage and security, plans to use the move as a platform to begin targeting this audience more directly with Nexsan’s range of purpose-built storage systems and appliances.

Under terms, Imation is handing over $105m in cash and $15m in stock. We understand that Nexsan generated revenue of about $90m in 2012, meaning Imation is paying roughly 1.3 times trailing sales. The acquisition of Nexsan is the largest purchase Imation has done in a half-decade and substantially thins its treasury. At the end of September, Imation, which is burning cash, had $186m in cash and equivalents. Click here to see our full report.

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EMC lays out a ‘Pivotal’ plan

Brenon Daly

Contact: Simon Robinson, Brenon Daly

Those wondering what ex-VMware chief Paul Maritz would end up doing as head of EMC strategy now have part of an answer: he’s going to run the Pivotal Initiative, what looks like a pending spinoff that brings together a number of ‘big data’ and cloud assets that EMC and VMware have developed and acquired in recent years. This new, 1,400-person organization (600 from VMware and 800 from EMC) will be ‘formally united’ by mid-2013, though the operational structure has yet to be determined.

At the core of the move is a desire to help EMC and VMware better capitalize on the effects that cloud computing is having on the application development and big data markets, with ‘new levels of focused investment.’ The initiative is centered on EMC’s Greenplum and Pivotal Labs, VMware’s vFabric (including Spring and GemFire), Cloud Foundry and Cetas, as well as other unspecified groups. Moving these assets into a single division also will allow both EMC and VMware to focus on their core businesses.

The planned joint venture continues the ongoing shuffle of assets between the parent company and its subsidiary. Since EMC sold a minority stake of VMware to the public in mid-2007, the company has sold at least two businesses to VMware. In early 2010, EMC divested its Ionix unit, with the service management unit finding a home in vCenter. A little more than a year later, the enterprise storage giant (quietly) sold its consumer online backup business, Mozy, to VMware.

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NetApp drops a bit of cash on CacheIQ

Brenon Daly

Contact: Brenon Daly, Simon Robinson

Tucked into NetApp’s fiscal second-quarter release Wednesday afternoon was the company’s first acquisition in about a year and a half. The storage giant reached for NAS acceleration startup CacheIQ, bringing more technology for its flash fight with rival EMC. The deal is being positioned as an IP play, and although NetApp doesn’t plan on developing CacheIQ’s existing product line, the technology looks set to add crucial performance capabilities to its emerging scale-out clustered storage strategy.

The fact that CacheIQ’s technology is key to NetApp is reflected in the price that we understand the company paid for the Austin, Texas-based startup. The valuation didn’t quite make it to the gravity-defying level that EMC paid for pre-revenue, all-flash array startup XtremIO back in May, but CacheIQ did more than OK on its exit. (Subscribers to The 451 M&A KnowledgeBase can click here to see our official estimate on terms of the transaction.)

A restart that emerged from stealth only about a year ago, CacheIQ had drawn in just $10m in funding from angels. The company actually traces its roots back to another startup, StorSpeed, which first emerged in 2009 with a very similar value proposition around NAS acceleration, but then buckled as investors lost interest. CacheIQ acquired StorSpeed’s IP and a small number of its developers in July 2010. According to our understanding, Cache IQ had just started selling its products, with revenue still at only about $1m. We’ll have a full report on the deal in our next Daily 451.

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j2 Global anxious for growth

Ben Kolada

Contact: Ben Kolada

Cloud communications vendor j2 Global has acquired 85-year-old media firm Ziff Davis Media for $167m, undoubtedly the biggest strategic stretch of the 40 acquisitions it has done. The announcement comes just two months after j2 was rejected in its attempt to buy online backup firm Carbonite. The rapid-fire M&A attempts, and the oddball pairing with Ziff Davis, give the impression that j2 will eagerly spend its cash to buy top-line growth.

Founded in 1927, Ziff Davis is a technology media firm, operating the websites PCMag.com, Geek.com, ExtremeTech.com, ComputerShopper.com and Toolbox.com (the latter two sites were acquired this year). It has been sliced and diced throughout its lifetime. According to The 451 M&A KnowledgeBase, in just the past three years Ziff Davis has done five divestitures.

Although j2 didn’t provide a clear rationale for the deal, it notes that the company has years of experience in digital media and online marketing and that this acquisition would expand that experience. It claims that its experience in this market comes from its own spending on advertising, as well as from its email marketing product, Campaigner, which j2 obtained only in December 2010 as part of its Protus IP Solutions purchase.

Reading deeper into the announcement, however, the primary rationale for this transaction seems simply to add to j2’s top line. With this acquisition, j2 expects its total revenue this year to exceed the top of its previously guided $345-365m range. Ziff Davis is expected to contribute $60m in revenue next year.

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The campaigning continues, at least on Wall Street

Brenon Daly

Contact: Brenon Daly

The election may be over, but some campaigns are continuing. At least that’s what’s happening on Wall Street, where two would-be buyers are trying to sway the electorate (directors and shareholders) in order to close acquisitions of two Nasdaq-listed tech companies. Whether or not either of these unsolicited efforts actually comes to a vote, well, that remains to be seen.

In the newest case, j2 Global earlier this week put a bear hug on Carbonite, pitching a (nonbinding, preliminary) offer of $10.50 for each share of the consumer-focused backup vendor. (J2 already owns almost 10% of Carbonite, having picked up the stake for about $20m in the open market in recent weeks.) Carbonite, which has traded mostly lower since its August 2011 IPO, rejected j2’s bid.

Meanwhile, Actian is not giving up on its two-month-old effort to land Pervasive Software. Earlier this week, it added 50 cents per share, or about $10m, to its original bid for the data-integration vendor. The $9-per-share offer from the buyout-backed company that used to be known as Ingres values Pervasive at its highest level in more than a decade.

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Brocade adds virtual routing capabilities with Vyatta buy

Ben Kolada

Contact: Ben Kolada

To add virtual networking to its storage portfolio, Brocade announced on Monday the all-cash acquisition of software-based virtual routing vendor Vyatta. The deal announcement reads as a tech and talent tuck-in, though it does also provide access to several Vyatta customers that are already implementing virtual networking.

Vyatta provides network routing, load balancing, address management, quality assurance, monitoring, administration and debugging software and hardware for businesses globally. Its software is used to manage both physical and virtual networks. The company started out with a virtual networking product with not only open APIs, but also open source software (Vyatta means ‘open’ in Sanskrit).

Brocade explained that the rationale for the deal was to complement its R&D investments in Ethernet fabrics and software-defined networking. But the enterprise networking and storage provider could also use Vyatta’s foothold in the virtual world to anchor its next steps. With the Vyatta buy, Brocade gains access to a set of customers that are already well along in their virtual networking implementations.

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