Storage sector M&A holding steady

Contact: Ben Kolada, Henry Baltazar

In its eighth storage play, IBM announced last week that it is acquiring data compression vendor Storwize. The move, which came quickly on the heels of Dell’s purchase of data de-duplication provider Ocarina Networks, brings the number of storage deals we’ve tallied in 2010 to 19. That’s roughly on par with the volume of storage transactions in the same period last year.

Of course, deal flow in the sector last year was dominated by a bidding war over Data Domain, which sold to EMC for $2.3bn after NetApp put the data de-dupe specialist in play but then got topped. We would note that EMC – the most active acquirer in the storage industry, having picked up some 15 storage companies over the past eight years – has been out of the storage market since it bought Data Domain. However, the storage giant may figure into the industry’s most recent deal. What do we mean?

Big Blue’s purchase of Storwize appears to be a reaction to EMC’s announcement in May that it was adding compression to its midrange Clariion and Celerra platforms. (The Storwize deal was first rumored in June, just after EMC’s announcement.) Storwize is unique in the storage space because it offers real-time data compression of up to 80%. Further, my colleague Henry Baltazar claims that IBM has already been working with Storwize for about a year. Storwize’s appliances run on System x servers, which Big Blue points out should ease the integration process – and help it to match the competitive moves by rival EMC.