EMC Blazes Trail Into Big-Data Market With Isilon Buy
EMC is cutting a big swath into the big-data storage market with its $2.25 billion cash purchase of Isilon. "That's a fairly unique market that is defined by speed as well as capacity," noted Rob Enderle, principal analyst at the Enderle Group. "EMC must have realized it needed to be in this market, and if so, they wanted a leader, so they chose Isilon."
EMC announced Monday it has agreed to acquire Isilon Systems, a "big-data" company, for US$2.25 billion in cash. EMC Chairman and CEO Joe Tucci noted that EMC decided to buy Isilon to take advantage of the waves of cloud computing and big data that are expected over the coming decade.
Isilon is a major player in the fast growing scale-out network-attached storage market -- a market that will expand 36 percent annually through 2014, to reach $6 billion, according to IDC projections.
The storage tools in this market are designed to begin small, and then scale quickly and nondisruptively up to 10 petabytes in size with extremely high performance and availability.
EMC sees Isilon products as a complement to EMC Atmos, the company's line of object-storage products that play in the big-data market. The market includes entertainment (massive storage of video and audio, as well as online streaming), life sciences (gene sequencing), and oil and gas (seismic interpretation). Cloud computing also uses big data products. EMC expects the combination of Atmos and Isilon technologies to reach a $1 billion run rate by the second half of 2012.
The data storage market has seen a lot of action this fall. In September, HP nabbed data storage company 3Par in a bidding war with Dell. In September, IBM bought Netezza, a data storage management company, further demonstrating the red-hot nature of the market for big-data storage.
At the time, speculation spread that Isilon might become become a candidate for acquisition; its share price has jumped 55 percent since the HP-Dell bidding war began.
EMC will pay a hefty price for Isilon -- $33.85 a share for Isilon, 29 percent more than Isilon's closing price on Friday. The price is 154 times earnings before interest, tax, depreciation and amortization. Isilon's stock price soared on the news, shooting up nearly 30 percent. EMC stock was down slightly.
The deal is expected to close by the end of the year, and it is not expected to have a material impact on EMC's earnings this year.
Going to Grow, Grow, Grow
The storage market looks good for a long way forward.
"All sorts of new unstructured data types are consuming a lot more data space," Laura DiDio, principal analyst at ITIC, told the E-Commerce Times. "Medical advances are going to consume more space. It's amazing what these medical devices show these days. It's like Superman with X-ray vision. That takes a lot of data."
Given the explosion in the data storage market, the Isilon buy is understandable.
"This is a savvy buy for EMC. They paid a premium of 30 percent, but it makes sense," said DiDio. "Storage needs -- in even a static organization -- double from year to year. If you're EMC, you're watching HP, Dell and IBM, and you don't want to be left behind."
While big data has been a niche in the storage market, it has expanded rapidly with the explosion of digital entertainment and the growth of cloud computing.
"This is a market of very big data. That's a fairly unique market that is defined by speed as well as capacity," Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times. "The data has to be very well protected and it has a unique storage requirement for quick access. Isilon will fit with EMC, since EMC is a major storage company."
Isilon fills a hole within EMC's data storage products. While EMC has some tools in the big-data market -- and intends to launch more -- the company's products are not as well-developed as Isilon's.
"I've often wondered why EMC wasn't in this market -- maybe because the market was somewhat nichey," said Enderle. "With media storage running at a fast growth rate, EMC must have realized it needed to be in this market, and if so, they wanted a leader, so they chose Isilon."