A different outcome of the EMC-Netezza rumors

Contact: Brenon Daly

Although EMC paid top dollar for Greenplum, the startup may not have been EMC’s top choice for its move into data warehousing. At least two sources have indicated that the storage giant talked with fellow Boston-area company Netezza earlier this year. Talks were apparently short-lived, as the two sides never got close on price.

When discussions were going on, Netezza stock was trading at about $10. Our sources report that EMC was kicking around a bid that had a roughly 40% premium – in other words, essentially where shares change hands right now. Netezza, which came public three years ago, has been trading at its highest level since October 2007 lately.

Yet even with the run in Netezza shares (up 45% so far this year), the company isn’t egregiously expensive. It currently sports a market capitalization of $870m, but has about $110m in cash and equivalents, lowering its net cost to $760m. That’s about 3.2 times projected sales this fiscal year and just 2.7x next fiscal year’s estimated sales.

As it is, EMC paid a substantially higher multiple for Greenplum. (Our estimate, based on two sources familiar with the transaction, is that EMC handed over about $400m, or roughly 13x estimated trailing sales, for Greenplum.) Of course, there are different motivations – and, naturally, multiples – attached to either move. Netezza was a much more mature company, with more than twice the number of customers of Greenplum. On the other side, Greenplum had developed some pretty slick technology, particularly for cloud environments, that should fit easily into EMC’s broad sales channel.