Last Minute Shopping for Seagate

Seagate is jumping deeper into storage services, thanks to a $185 million cash acquisition of private firm EVault. (See Seagate Buys EVault.)

The hard drive vendor disclosed the deal today, which it expects to close by March. Seagate will operate EVault as a wholly owned subsidiary and its new Seagate Storage Services division. The division will focus on the SMB market.

"Today's announcement highlights a strategic next step into services, which is a natural extension of Seagate's core business," Seagate CEO Bill Watkins said in a release announcing the deal. "Over the past three years, Seagate has been executing a strategy designed to broaden its customer base and increase growth opportunities by expanding beyond its core hard disc drive business into the broader storage solutions category."

Seagate already offers data recovery services, which involve restoring data off corrupted storage devices. EVault brings it online backup and recovery archiving, email, e-discovery, and compliance services.

Although EVault does not exclusively go after SMBs, it beefed up its SMB offerings this year when it rolled out a business continuity consulting management practice for SMBs in July. (See EVault Assists SMBs)Seagate plans to swallow EVault whole, retaining all 250 employees and all of its proudcts and services. EVault CEO Phil Gilmour will be offered a senior management position. EVault claims more than 8,500 customers, and Seagate says the startup has been profitable. EVault raised $24 million in VC funding since it was founded in 1997.

At least one Wall Street analyst expects Seagate to keep the EVault management team intact as it tries to expand beyond its hard drive business with this latest deal -- exactly one year after it spent $1.9 billion on rival Maxtor. (See Seagate Munches Maxtor.)

"The [EVault] acquisition highlights Seagate's willingness to invest in higher growth, more profitable opportunities outside its core hard disk drive business," analyst Dan Renouard of R.W. Baird wrote in a note today. "We expect Seagate will continue to have EVault's current management team run this online business."

Seagate isn't the only vendor moving deeper into managed storage services. AT&T, Savvis, and Verizon are expanding their storage services. (See Managed Storage Moves On.)

Also, traditional storage services firms also appear to be on the upswing. Incentra Solutions claimed a 56 percent year over year increase in revenues last quarter, and industry sources say Arsenal Digital is profitable or close to it. (See Incentra Reports Earnings.)Dave Raffo, News Editor, Byte and Switch