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2018 M&A in storage centered on flash, cloud and backup

No billion-dollar blockbusters in 2018 storage M&A activity as vendors stayed away from big deals and concentrated on filling gaps in their flash, cloud and backup portfolios.

There were no blockbuster mergers and acquisitions with a direct impact on the enterprise data storage market in 2018. Instead, vendors filled gaps in their product portfolios with small deals.

The most significant 2018 M&A deal in technology was IBM's $34 billion purchase of open source software vendor Red Hat. But, while Red Hat will bring its Ceph and Gluster storage software to IBM's storage portfolio, those technologies were hardly the focus of the acquisition. Cloud computing was the main driver.

Truly storage-centric 2018 M&A was hard to assess from a dollars-and-cents perspective because most of the deals were so small that financial terms were undisclosed. All 2018 deals paled in comparison to Dell's $60 billion-plus deal for EMC, the estimated $18 billion sale of Toshiba's business to a Bain Capital-led consortium and Broadcom's $5.9 billion purchase of storage networking specialist Brocade. Those three blockbusters all took place since 2016.

Microsoft kicked off 2018 with its purchase of Avere Systems for an undisclosed sum. The Avere deal gave Microsoft high-performance file system and caching technologies that can span on-premises and public cloud deployments.

High-performance computing (HPC) specialist DataDirect Networks (DDN) acquired flash and hybrid array vendor Tintri for $60 million after Tintri filed for bankruptcy in July. A month later, all-flash array vendor Pure Storage picked up software-defined storage startup StorReduce for its data-reducing deduplication technology, and low-end NAS specialist Drobo joined forces with enterprise SAN vendor Nexsan under the name StorCentric.

In October, flash array pioneer Violin Systems scooped up the X-IO Storage division of X-IO Technologies to broaden its product line. Despite its pending IBM acquisition, Red Hat bought hybrid cloud data management startup NooBaa in November.

The backup space was also busy with 2018 M&A news, as Carbonite, Druva, Kaseya, Rubrik and Veeam Software acquired companies.

Below is a review of 2018 M&A in the enterprise data storage industry:

Microsoft enhances hybrid cloud options

Microsoft bolstered its hybrid cloud story with the January purchase of Avere Systems. The deal gave Microsoft NFS and SMB file-based storage for Linux and Windows clients running in the public cloud, on premises or in a hybrid mix of the two. Avere's physical and virtual FXT Edge Filer appliances use a combination of file system and caching technologies to boost the performance of compute-intensive applications.

Avere vFXT for Microsoft Azure launched in public preview in September, and Microsoft pledged to support Avere vFXT on other public cloud platforms such as AWS and Google Cloud Platform. Microsoft also plans to continue to upgrade and support the Avere FXT physical appliance.

Flash-focused 2018 M&A

DDN rescued troubled Tintri and pledged to restore support to its customer base, enhance its product roadmap and hire 100 new employees. Tintri's analytics-driven flash and hybrid storage arrays should help to broaden DDN's customer base into mainstream enterprise IT. Tintri claimed around 1,500 customers, including Fortune 1000 companies such as Advanced Micro Devices, Avaya, Chevron and Comcast.

Pure Storage said its acquisition of StorReduce would facilitate the addition of deduplication technology to its FlashBlade file and object storage. Pure Storage president David Hatfield said the company also plans to extend StorReduce's cloud partnerships.

Violin's purchase of X-IO Storage also had a deduplication angle. X-IO's deduplication process is designed to minimize hardware resources, and Violin plans to integrate the technology to optimize price and performance. X-IO Storage's Intelligent Storage Element (ISE) flash and hybrid storage arrays can complement Violin's technology, as the flash pioneer tries to reverse its fortunes after emerging from Chapter 11 bankruptcy in 2017. X-IO's ISE targeted small- to medium-sized enterprises, whereas Violin focused on extreme performance for larger enterprises.

X-IO reorganized in 2016 following substantial operating losses and split into X-IO Storage and Axellio divisions the following year. Violin acquired the X-IO Storage division. X-IO's edge computing and hyper-converged systems are now sold under the Axellio brand name.

Drobo and Nexsan will operate as independent divisions of the newly formed StorCentric. Nexsan's product line includes the all-flash and hybrid Unity Unified Storage for block and file workloads, high-density E-Series SAN storage and Assureon archive storage. Drobo targets small and medium-sized businesses with its disk and hybrid SAN, NAS and direct-attached storage.

Red Hat acquired Israel-based NooBaa technology to bolster its existing storage software, including Ceph and OpenShift Container. NooBaa's software is designed to help application developers manage data storage services across clouds.

Backup mergers and acquisitions

On the data protection front, Carbonite purchased fellow cloud backup pioneer Mozy, a subsidiary of Dell Technologies, for $145.8 million. Both companies initially focused on consumers, but Mozy expanded to business users when EMC bought the company in 2007. Mozy joined Dell in 2016 as part of the EMC transaction.

Carbonite's Mozy deal extended the Boston vendor's recent string of acquisitions. Carbonite picked up Datacastle's endpoint backup and Double-Take Software's high-availability technology in 2017 and Seagate's EVault cloud backup and disaster-recovery-as-a-service business in 2015.

Veeam spent $42.5 million to buy N2WS, which focuses on cloud-native enterprise backup and recovery for AWS workloads. Veeam, which had been an investor in N2WS, is operating it as an independent company.

In another AWS-focused acquisition, data protection and management vendor Druva scooped up CloudRanger for an undisclosed sum and integrated the Irish startup's technology into its Cloud Platform. CloudRanger provides backup and disaster recovery (DR) capabilities for AWS services, such as Elastic Compute Cloud, Elastic Block Store, Relational Database Service, and Redshift cloud data warehouse. CloudRanger claimed to have more than 300 customers, including NASCAR, Rockwell Collins and Vanderbilt University.

In another backup-related transaction, Rubrik bought startup Datos IO for an undisclosed sum to expand its cloud data management capabilities. Datos IO focuses on the backup and recovery of cloud-based NoSQL databases and big data file systems. The Datos IO customer base includes Cardinal Health, eBay, Expedia, Home Depot, Macy's, T-Mobile and Verizon.

IT infrastructure management vendor Kaseya closed two deals in 2018. The company merged with partner Unitrends, a backup and DR software and hardware provider, and acquired cloud-to-cloud backup specialist Spanning Cloud Apps. Spanning and Unitrends run independently within Kaseya, and all three are controlled by Insight Venture Partners.

The Kaseya Unified Backup appliance combines backup, ransomware detection and cloud-based backup and DR services and resulted from Kaseya's work with Unitrends. Kaseya Office 365 Backup powered by Spanning is available as part of the Kaseya Unified Backup Suite.

Large storage vendors quiet on 2018 M&A front

Storage vendors who helped drive M&A activity in recent years were quiet in 2018. Western Digital, which spent $19 billion on SanDisk and $4.8 billion on HGST since 2012, made no acquisitions last year. EMC had been a frequent acquirer of storage companies before the Dell merger, but Dell EMC made only one small deal in 2018. It acquired DataFrameworks for its ClarityNow software that helps managed file and object data.

NetApp, No. 2 behind Dell in networked storage revenue, also made one small deal in 2018. NetApp acquired StackPointCloud in September and quickly launched NetApp Kubernetes Service based on its new StackPointCloud technology.

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