Carbonite looks upmarket with Zmanda buy

Contact: Brenon Daly

After organically attempting to build up its SMB backup business over the past two years, Carbonite decided it needed to do some shopping to accelerate that initiative. The consumer-focused company said Thursday that it will hand over $15m for backup and recovery vendor Zmanda. It is Carbonite’s first acquisition since it went public in mid-2011.

Carbonite’s push into the SMB market is crucial for its business, but it is a risky move for a company that sold exclusively to consumers for the first five years of its life. Carbonite only unveiled an SMB offering in 2010, and that business currently contributes only 15 cents of every dollar in bookings.

As it looks to move upmarket, Carbonite is also facing risks to its core business. The consumer backup market is a lot more cluttered and confused than it was when Carbonite launched in 2005. For instance, Dropbox – although not a full backup vendor by any means – only got going two years after Carbonite, but it has nonetheless drawn 50 million users who store files in that service. Privately held Dropbox doesn’t disclose its revenue but it is thought to be nearly three times bigger than Carbonite’s.

The acquisition of Zmanda also comes as Carbonite is working through recent changes in its basic business, such as introducing additional editions of its core backup offering and shifting around its advertising spending. (Advertising is Carbonite’s single biggest expense, typically consuming about half of the company’s revenue in any given quarter.)

Carbonite has, admittedly, tripped up on a few of those changes. After posting 43% sales growth in the first half of 2012, it lowered its forecasted revenue growth rate to just 34% growth for the back half of this year. (Carbonite, which is in the process of swapping out its CFO, reports Q3 results on October 25.) Shares of the company are currently changing hands at their lowest level since the IPO. Wall Street values the backup vendor, which will record sales of about $83m this year, at just $160m.

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