8 Significant Data Storage Mergers Of 2016

The storage industry continued to consolidate this year, highlighted by the Dell-EMC mega-merger.

Jim O'Reilly

November 28, 2016

9 Slides

There was a time when computer storage M&A activity ran at a fierce rate. EMC had deep pockets and the industry was ripe for consolidation, mainly in iSCSI arrays. That’s not so much the case today. Both acquirers and targets have thinned out, a trend that accelerated with the Dell-EMC deal. Just completed, Dell’s purchase of EMC is of course the blockbuster M&A story of the year, but with its high-debt leverage it effectively takes both companies out of M&A activity for the near future.

Still, we saw a number of noteworthy deals this year that illustrate ongoing trends in the data storage industry. Western Digital closed its acquisition of SanDisk in May in what looks like a wise move based on industry hard-disk drive shipment declines. The entire vendor base for Fibre-Channel technology that's used in SANs was acquired in 2016, reflecting its long term weakness in the face of Ethernet technology. Meanwhile, NetApp completed its acquisition of hot startup SolidFire to boost its position in the rapidly growing all-flash storage market.

The future profile of storage M&A is likely to be focused on software companies, as the impact of open APIs with software-defined storage begins to bite into the market. With substantially lower capital requirements, the current level of VC investment can sustain a dynamic crop of startups, while the flow of white-box appliances will provide the vehicles for the software to be integrated. We likely will see a spate of smaller deals as these startups find exits.

There will be further consolidation on the existing platform provider base. There are too many all-flash array vendors and some will die off or be acquired. Violin is a recent example, with exchange listing issues.

There's a good chance Hewlett Packard Enterprise will do some shopping in 2017. Rumored deals include all-flash array startup Pure Storage, top hyperconverged infrastructure provider Nutanix, and Scality, in which HPE already is an investor. Nutanix competitor SimpliVity could be another HPE target.

There has also been a spate of Chinese explorations into acquisitions, especially in flash, including Tsinghua exploring acquisition of  Micron. Likely, these will fail due to US government oversight. Still, China is keen to build up its intellectual property, and has made inroads in flash technology with Japanese and Taiwanese acquisitions.

(Image: AtstockProductions/Shutterstock)

About the Author(s)

Jim O'Reilly

President

Jim O'Reilly was Vice President of Engineering at Germane Systems, where he created ruggedized servers and storage for the US submarine fleet. He has also held senior management positions at SGI/Rackable and Verari; was CEO at startups Scalant and CDS; headed operations at PC Brand and Metalithic; and led major divisions of Memorex-Telex and NCR, where his team developed the first SCSI ASIC, now in the Smithsonian. Jim is currently a consultant focused on storage and cloud computing.

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