EMC Offers $2.25 Billion for Isilon Systems

Offers $33.85 per share in cash for Scale-out Network Attached Storage vendor. Anticipates Isilon and Atmos run rate of $1 billion by 2012.

November 16, 2010

D.H. Kass

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EMC Corp. said that it has offered $2.25 billion, or $33.85 per share in cash, to acquire Isilon Systems Inc., a publicly-held provider of scale-out network attached storage systems based in Seattle, WA.

The companies said that both boards of directors have approved the transaction, which is subject to standard regulatory approval. The deal is expected to finalize later this year. EMC said that the acquisition will not have a material impact on its 2010 full-year earnings but will contribute to its 2011 per share earnings.

In storage technology, scale-out refers to NAS architectures set up for rapid growth in high performance environments. Researcher International Data Corp. pegs the market at some $6 billion by 2014, growing at a 36 percent annual clip in the next four years.

EMC believes that Isilon’s solutions, combined with its Atmos line, a multi-petabyte cloud storage offering, will offer customers a scalable, low-cost infrastructure to handle massive amounts of data--either in public or private cloud environments--generated by new applications in markets such as life sciences, media and entertainment, and oil and gas.

The vendor projects that its Atmos and Isilon storage solutions together will generate upwards of $1 billion in sales in the next 18 to 24 months, officials said.

“The unmistakable waves of cloud computing and ‘Big Data’ are upon us,” said Joe Tucci, EMC chairman and chief executive. “Customers are looking for new ways to store, protect, secure and add intelligence to the vast amounts of information they will accumulate over the next decade,” he said.

Sujal Patel, Isilon chief executive, said that the deal enables Isilon to “leverage EMC’s unparalleled market reach and portfolio of leading technology assets to build on our already significant success in this fast-growing space.”

Charles King, principal analyst at researcher Pund-IT Inc., said that the acquisition addresses key drivers in the high volume storage market, namely, helping clients to cost-effectively handle massive amounts of data and best incorporate cloud-based services.

“The pair appears well-suited strategically, and both companies’ individual products and broader strategies offer multiple leverage points,” King said.

“EMC’s size, experience, resources market penetration and industry leadership will offer the dynamic yet still immature Isilon what it needs to get to the next level,” he said. “Given Isilon’s existing client list, the payoffs should begin almost immediately for EMC, justifying its optimistic tripling of revenues over the next two years and becoming increasingly positive as the cloud market continues to evolve.”

EMC also reaffirmed its earlier-released 2010 outlook, expecting $16.9 billion in revenue and $.91 per share earnings.

TAGS: EMC,network attached storage,Isilon,scale-out,Storage

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