Mergers & Acquisitions on Ulitzer

For consumers, the time leading up to the holiday Christmas season is usually busy including door busters as well as black Friday among other specials for purchasing gifts and other items. However savvy shoppers will wait for after Christmas or the holidays altogether perhaps well into the New Year when some good bargains can become available. IT customers are no different with budgets to use up before the end of the year thus a flurry of acquisitions that should become evident soon as we are entering earnings announcement season.

However there are also bargains for IT organizations looking to take advantage of special vendor promotions trying to stimulate sales, not to mention for IT vendors to do some shopping of their own. Consequently, in addition to the flurry of merger and acquisition (M and A) activity from last summer through the fall, there has been several recent deals, some of which might make Monty Hall blush!

Some recent acquisition activity include among others:

• Dell bought Perot systems for $3.9B
• DotHill bought Cloverleaf
• Texas Memory Systems (TMS) bought Incipient
• HP bought IBRIX and 3COM among others
• LSI bought Onstor
• VMware bought Zimbra
• Micron bought Numonyx
• Exar bought Neterion

Now the industry is abuzz about Dell, who is perhaps using some of the lose change left over from holiday sales as being in the process of acquiring Israeli clustered storage startup Exanet for about $12M USD. Compared to previous Dell acquisitions including EqualLogic in 2007 for about $1.4B or last years Perot deal in the $3.9B range, $12M is a bargain and would probably not even put a dent in the selling and marketing advertising budget let alone corporate cash coffers which as of their Q3-F10 balance sheet shows about $12.795B in cash.

Who is Exanet and what is their product solution?
Exanet is a small Israeli startup providing a clustered, scale out NAS file serving storage solution (Figure 1) that began shipping in 2003. The Exanet solution (ExaStore) can be either software based, or, as a package solution ExaStore software installed on standard x86 servers with external RAID storage arrays combining as a clustered NAS file server.

Product features include global name space, distributed metadata, expandable file systems, virtual volumes, quotas, snapshots, file migration, replication, and virus scanning, and load balancing, NFS, CIFS and AFP. Exanet scales up to 1 Exabyte of storage capacity along with supporting large files and billions of file per cluster.

The target market that Exanet pursues is large scale out NAS where performance (either small random or large sequential I/Os) along with capacity are required. Consequently, in the scale out, clustered NAS file serving space, competitors include IPM GPFS (SONAS), HP IBRIX or PolyServe, Sun Lustre and Symantec SFS among others.

Figure 1 Generic clustered storage model (Courtesy The Green and Virtual Data Center

(CRC)

For a turnkey solution, Exanet packaged their cluster file system software with various vendors storage combined with 3rd party external Fibre Channel or other storage. This should play well for Dell who can package the Exanet software on its own servers as well as leverage either SAS or Fibre Channel MD1000/MD3000 external RAID storage among other options (see more below).

Click here to learn more about clustered storage including clustered NAS, clustered and parallel file systems.

Whats the dell play?

• Its an opportunity to acquire some intellectual property (IP)
• Its an opportunity to have IP similar to EMC, HP, IBM, NetApp, Oracle and Symantec among others
• Its an opportunity to address a market gap or need
• Its an opportunity to sell more Dell servers, storage and services
• Its an opportunity time for doing acquisitions (bargain shopping)

Note: IBM also this past week announced their new bundled scale out clustered NAS file serving solution based on GPFS called SONAS. HP has IBRIX in addition to their previous PolyServe acquisition, Sun has ZFS and Lustre.

How does Exanet fit into the Dell lineup?

• Dell sells Microsoft based NAS as NX series
• Dell has an OEM relationship with EMC
• Dell was OEMing or reselling IBRIX in the past for certain applications or environments
• Dell has needed to expand its NAS story to balance its iSCSI centric storage story as well as compliment its multifunction block storage solutions (e.g. MD3000) and server solutions.

Why Exanet?
Why Exanet, why not one of the other startups or small NAS or cloud file system vendors including BlueArc, Isilon, Panasas, Parascale, Reldata, OpenE or Zetta among others?

My take is that probably because those were either not relevant to what Dell is looking for, lack of seamless technology and business fit, technology tied to non Dell hardware, technology maturity, the investors are still expecting a premium valuation, or, some combination of the preceding.

Additional thoughts on why Exanet
I think that Dell simply saw an opportunity to acquire some intellectual property (IP) probably including a patent or two. The value of the patents could be in the form of current or future product offerings, perhaps a negotiating tool, or if nothing else as marketing tool. As a marketing tool, Dell via their EqualLogic acquisition among others has been able to demonstrate and generate awareness that they actually own some IP vs. OEM or resell those from others. I also think that this is an opportunity to either fill or supplement a solution offering that IBRIX provided to high performance, bulk storage and scale out file serving needs.

NAS and file serving supporting unstructured data are a strong growth market for commercial, high performance, specialized or research as well as small business environments. Thus, where EqualLogic plays to the iSCSI block theme, Dell needs to expand their NAS and file serving solutions to provide product diversity to meet various customer applications needs similar to what they do with block based storage. For example, while iSCSI based EqualLogic PS systems get the bulk of the marketing attention, Dell also has a robust business around the PowerVault MD1000/MD3000 (SAS/iSCSI/FC) and Microsoft multi protocol based PowerVault NX series not to mention their EMC CLARiiON based OEM solutions (E.g. Dell AX, Dell/EMC CX).

Thus, Dell can complement the Microsoft multi protocol (block and NAS file) NX with a packaged (Dell servers and MD (or other affordable block storage) powered with Exanet) solution. While it is possible that Dell will find a way to package Exanet as a NAS gateway in front of the iSCSI based EqualLogic PS systems, which would also make for an expensive scale out NAS solution compared to those from other vendors.

Thats it for now.

Lets see how this all plays out.

Cheers gs

Greg Schulz - Author The Green and Virtual Data Center (CRC) and Resilient Storage Networks (Elsevier)
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