Tag: QSFT

An acquisition breaks the back of Bakbone

Brenon Daly1 Comment

Contact: Brenon Daly

In some ways, it was a misguided purchase last year by BakBone Software that led to yesterday’s distressed sale to Quest Software. The backup and recovery vendor made its largest-ever acquisition in May 2009, paying some $16m in cash and stock for ColdSpark. The rationale of the combination seemed sound at the time: broaden BakBone’s data-protection platform by adding ColdSpark’s messaging management. What could go wrong with that?

Unfortunately, plenty went wrong, as the two businesses never meshed. BackBone relies heavily on its indirect sales channel, while ColdSpark sold directly into enterprises. The average sales price for the messaging software was significantly higher than BakBone’s core storage products, which made for a highly unpredictable sales cycle at the acquired business. In the roughly one year that it owned ColdSpark, BakBone recorded only $1m in revenue from the business, according to SEC filings. It shuttered ColdSpark last May.

The integration struggles, however, came at a steep cost to BakBone, a Bulletin Board-traded company where cash has always been tight. Consider this: to generate the roughly $1m in sales at ColdSpark required spending of more than $3m in just R&D and sales/marketing efforts, to say nothing of the additional costs at the business. The spending drained BakBone’s treasury to just $5m, as of the company’s latest quarterly report.

Obscured by the smoke from the flameout around the acquisition is the fact that BakBone’s core storage management business actually puts up pretty decent numbers. In the latest fiscal year, it has run at a respectable 91% gross margin and 13% operating margin, while sales increased 9%. It boasts more than 17,000 customers. And Quest is getting all that for a relative bargain, paying just 1x sales for BakBone. As a final note on the deal, which is expected to close early next year, we would add that BakBone stands as the only public company we’re aware of that Quest has ever acquired

Quest shops again, virtually

Brenon Daly

Contact: Simon Robinson, Brenon Daly

A year after closing a deal with Vizioncore that got Quest Software into the storage virtualization market, the company went shopping again this week. The systems management company picked up some of the assets of venture-backed MonoSphere, most notably its Storage Horizon product. This is a storage analysis and reporting tool designed to help storage managers assess the capacity optimization of their existing multivendor arrays so they can reclaim unused capacity and project future requirements more accurately. Storage Horizon will slot into Quest’s portfolio for managing storage in virtualized server environments, which is currently sold under the vOptimizer Pro brand.

As part of Quest, MonoSphere may well have the opportunity to deliver on the promise of its technology. (It was that potential that attracted some $41m in backing from Intel Capital, ComVentures and Lightspeed Venture Partners.) On its own, MonoSphere didn’t have much to show for itself. That’s a familiar story concerning other storage-reporting specialists, which often find that large enterprises are hesitant to buy such tools from small vendors, especially when their existing suppliers are happy to offer similar functionality for little or no cost. But with Quest, which counts more than 100,000 customers and expects to report some $730m in 2008 revenue, MonoSphere may be able to land customers that had previously slipped through its hands.