Hitachi Data Systems acquires Bluearc

[disclosure note: this is our space, so we have definite opinions on this]

This was liable to be the only possibly path for Bluearc to continue outside of an IPO. The latter would probably not have gone well. They raised their last round of capital a year ago. Reading what I wrote then, it was fairly prescient.

Since that was written, EMC acquired Isilon, Netapp acquired LSI’s Enginio and other products, Dell grabbed Compellent (different market), HP grabbed 3Par. One might think that there were a run on storage companies or something like that.

Likely what occurred was that HDS saw the competitive landscape change quickly, saw a silo-building/stacking effect in the market. They decided that they needed more vertical integration to better compete with their other competitors (EMC, Netapp, …). Bluearc was itching to avoid an IPO.

Chances are that of the more than $225M poured into this deal by VC’s and investors … chances are … they took a significant hair cut. Better something than nothing.

So this leaves very few players left in the scale out NAS space. Very few. You have pure software houses like Gluster (whom I think is an acquisition target, I am guessing by Redhat, though I could see Oracle courting them if Redhat isn’t wise enough to do so). Ceph is up and coming, as are a few others in this space. You have appliance makers like Panasas, though I am not sure of their long term outlook. You have a few smaller houses (some with … er … questionable marketing … which likely covers pretty poor performance), and folks like us with some of the fastest hardware and very well tuned software stack on the market (and we try to be as open as we can possibly be).

I do expect more M&A, and more announcements soon. No, we have not been acquired. The scale out NAS space has been largely absorbed, with a few specialist and solutions providers surviving. I don’t expect much change form HDS’s acquisition of Bluearc, I think it was more defensive than not. And I think this is going to drive some defensive acquisitions on the software side (Redhat etc.).

No one ever said this market was boring.

[update] This analysis says some orthogonal things, and dives deep into the SEC forms. This is the right approach, though I am not sure on their valuation math. If I were HDS, I’d have gone to them and said something close to “why go for an uncertain IPO when you can get a certain exit from us?” I doubt it was in the $500M region. I doubt that the VCs didn’t take a significant hair cut. HDS got a great deal here in all likelihood, and Bluearc is happy to be out of having to worry about IPO in a very unfriendly market.

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