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One Way Out

One Way Out With one IPO in 30 months, storage startups have one viable exit strategy left

If the storage IPO is not dead, its certainly comatose.

Successful storage startups used to grow up into big strong public companies. Now they merely become pieces of bigger public companies.

It seems hardly a week goes by – and certainly not a month – without a public company gobbling a private storage firm. Yet only one storage company, Xyratex Ltd. (Nasdaq: XRTX), has gone public over the past 30 months (see Xyratex Swims in Public Pool).

These aren’t exactly boom times for IPOs in any industry. Still, companies are going public in some sectors. According to Hoover’s, 41 companies completed IPOs in the first quarter of this year and 35 more this quarter. When it comes to public and private storage companies, though, there's a preference for the mating dance of acquisition. The large public companies derive a good deal of their technology that way, and startups give their investors a nice payout.

A year ago, it looked as if the IPO drought was coming to an end. When Xyratex went public on June 24, 2004, Engenio Information Technologies Inc. had already filed paperwork for an IPO. Wall Street buzz said CommVault Systems Inc. was close to going, and Softek Storage Solutions Inc.’s spinoff from Fujitsu was considered a precursor to an IPO (see Window of Opportunity and Softek Taken in Management Buyout). Executives at companies such as BlueArc Corp. and Xiotech Corp. said they were watching to time their own IPO moves.

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