Carbonite continued its acquisition spree this week by buying Mozy, one of its oldest cloud backup competitors.
The Carbonite acquisition of Mozy from a subsidiary of Dell Technologies Inc. for $145.8 million in cash brings together two of the first cloud backup players in the field.
Mozy will help Carbonite continue to build out its data protection portfolio and bring it more business customers. While Carbonite and Mozy both originally focused on consumers, Mozy took more of a turn toward selling to business users after being acquired by EMC in 2007 for $76 million. Mozy became part of Dell after the 2016 Dell-EMC merger.
Mozy has about 100,000 consumer customers and 35,000 business subscribers.
Customers are key
The Carbonite acquisition is mainly to add customers, said Phil Goodwin, research director in IDC's storage systems and software practice.
"It is furthering Carbonite's strategy of trying to maximize the number of end users they have," Goodwin said. That, in turn, will help Carbonite to spread its fixed costs across a larger number of subscribers and maximize profits, he said.
Carbonite, which is based in Boston, has been building a data protection portfolio that includes high availability, disaster recovery and migration tools.
In 2017, Carbonite purchased Datacastle's endpoint backup and Double-Take Software to improve its high-availability technology. In addition, last year Code42 began referring consumers to Carbonite after revealing plans to close its consumer cloud backup product in 2018 to focus on other sectors.
Many of those Code42 customers were looking for more than just backup, said Norman Guadagno, Carbonite's senior vice president of marketing. Backup to cloud is also typically not sufficient for business data protection, he said. Those businesses may need high availability, for example.
"Introducing Carbonite's platform to 135,000 customers is very exciting to us," Guadagno said.
Norman Guadagnosenior vice president of marketing, Carbonite
Carbonite has been integrating pieces of technology from its acquisitions, such as a replication engine from Double-Take, CEO and President Mohamad Ali said on Tuesday's earnings call.
"Our integration plan is to similarly take the best of Mozy, and Mozy has some very interesting pieces of technology that can make that platform even stronger," Ali said.
Ali noted that Mozy was the first company he wanted to acquire when he started as CEO three years ago.
"We were patient and we waited," Ali said. "The asset came on the market and we were there, ready to do the deal."
Carbonite closed on a deal to buy Seagate's EVault cloud backup and disaster-recovery-as-a-service business in 2015, shortly after Ali started. That Carbonite acquisition helped propel the vendor into the midmarket and was a fundamental part of its evolution, Guadagno said.
How will Mozy fit in with Carbonite?
Guadagno said he expects the Mozy deal to close within two months. Until then, Carbonite executives are limited about what they can say about their integration plans.
"Between now and the close, they're a competitor," Guadagno said.
Mozy sells three major products: MozyEnterprise for enterprises, MozyPro for smaller businesses and MozyHome for consumers. MozyHome offers a free account for up to 2 GB of data storage. Guadagno couldn't say if the free option would remain, or comment about what will happen to pricing for Mozy customers.
"As we leverage the much, much more efficient Carbonite cloud infrastructure and effectively migrate the Mozy infrastructure onto our infrastructure, we expect to drive tremendous profitability and that's something we've done before," Ali said on the earnings call. "We did it very successfully with EVault, and we expect to do it very successfully here."
Mozy never seemed to be fully part of the Dell EMC portfolio, lying more on the fringe of its product lineup, Goodwin said. Dell EMC products are focused on large enterprises and SMBs, and the IT giant mainly stays out of the consumer market.
"We're fully committed to providing best-in-class data protection, backup and recovery solutions for Dell EMC SMB and enterprise customers," Dell said in a statement. "The move announced [Tuesday] is designed to ensure that Mozy is adequately positioned for success in the rapidly evolving cloud backup space, and to enable both Dell EMC and Dell Technologies to increase our focus on core digital transformation investments."
The Carbonite acquisition marks the second time Dell has sold off a cloud backup property since the EMC merger. In April 2017, Dell spun off Spanning, a cloud-to-cloud backup company that EMC had acquired. In 2016, it also sold Quest Software, which included data protection products. Dell has kept the core EMC backup products, including Avamar, NetWorker and Data Domain.
A Dell spokeswoman said the company can't disclose employment and office numbers for Mozy.
Carbonite's biggest competitors now include Acronis, Barracuda, CloudBerry, Druva, Iland and OffsiteDataSync, Goodwin said.
Carbonite will fund the transaction with existing cash and newly secured financing commitments in the form of a $120 million revolving credit facility, according to the vendor.
Carbonite reports 2017 earnings, looks ahead
Carbonite also said on Tuesday that its revenue for the fourth quarter was $61.7 million, an increase of 15% from $53.5 million in the fourth quarter of 2016 but about $1.4 million below Wall Street expectations.
Revenue for 2017 was $239.5 million, an increase of 16% from $207 million in 2016. Carbonite reported a net loss of $1.6 million in the quarter and lost $4 million for the full year.
CFO Anthony Folger forecasted that Mozy will contribute $50 million to $55 million of bookings in the last three quarters of 2018, with about 85% coming from business offerings out of the Carbonite acquisition.
In the first half of the year, Carbonite will launch its first disaster recovery as a service (DRaaS) product, Carbonite Recover. Less than 10 Carbonite customers are trying it out now.
Carbonite Recover comes from a combination of Double-Take technology and internal development, Ali said on the earnings call.
Target customers for the DRaaS product include those who don't have their own data center and those looking for affordable disaster recovery in the cloud, Guadagno said.
Carbonite claims more than 1.5 million customers. The company has about 8,000 channel partners, value-added resellers and managed service providers. It has about 1,000 employees.