Update: EMC to buy Isilon for $2.25B

IDG News Service - EMC announced Monday it is buying NAS (network-attached storage) vendor Isilon Systems for roughly $2.25 billion. Both companies' boards have approved the deal, which is expected to be finalized later this year.

Isilon's NAS systems will be aligned with EMC's Atmos object storage products to provide a low-cost, scalable platform for managing large amounts of "Big Data," an industry term referring to the growing flood of information generated by utilities, online media companies and other verticals, according to a statement.

"This acquisition is all about accelerating growth and rapidly capitalizing on a growing opportunity," EMC CEO Joe Tucci said during a conference call. It will leave EMC "well positioned at the intersection of cloud computing and Big Data," he added.

The pending deal follows previous reports that EMC planned to buy Isilon but couldn't agree on a price. It ties into a generally hot market of late for storage technology. Earlier this year, Dell and Hewlett-Packard engaged in a bidding war over storage vendor 3Par that ran the ultimate purchase price up to $2.4 billion, with HP the winner. Dell had originally offered $1.15 billion for the company.

Isilon's technology is also complementary to the analytic database technology EMC gained with its recent acquisition of Greenplum, said Pat Gelsinger, president of EMC information infrastructure products.

The Seattle company has about 1,500 customers and 500 employees. It makes sense for Isilon to be acquired by EMC because "the market opportunity for scale-out [storage] is much larger than our particular reach," said CEO Sujal Patel.

EMC is paying a significant premium for Isilon, which reported $53.8 million in revenue for its third quarter ended Sept. 30, a 77% jump over the same period in 2009.

The healthy bid raises the possibility other bidders were in play for Isilon. Tucci declined to say whether this was the case.

The acquisition "makes a ton of sense" for EMC, according to Forrester Research analyst Andrew Reichman. "Their NAS products haven't competed well with NetApp and they really don't have a scale-out option," he said.

Isilon competes with companies like BlueArc and DataDirect Networks, which could also be acquisition targets, Reichman said.

The question is what vendor would be the buyer, he added. Oracle already has a variety of storage technologies from its purchase of Sun Microsystems, Reichman said. A more likely candidate could be Cisco, he said.

Meanwhile, it's also hard to say whether EMC might find itself in a bidding war over Isilon, according to Reichman. Their offer "certainly signals that they're not messing around, that they're in it to win it."