HP’s bid for 3PAR not its first

After a bit of tap dancing, HP revealed that today’s $1.6 billion blockbuster bid for 3PAR was not its first.

HP published its offer letter today in which executive vice president, chief strategy and technology officer Shane Robinson wrote:

“We propose to increase our offer to acquire all of 3PAR outstanding common stock to $24.00 per share in cash. This offer represents a 33.3% premium to Dell’s offer price and is a “Superior Proposal” as defined in your merger agreement with Dell.”

In a conference call with media and analysts, Dave Donatelli, executive vice president and general manager of HP’s Enterprise Server, Networking and Storage Business, said HP had “done due diligence on this deal prior to anything you’ve seen announced publicly” and “had multiple meetings with [3PAR’s] senior management.”

Finally, when asked whether HP had an outstanding offer on the table when Dell made its move for 3PAR, HP’s Steve Fieler, vice president, investor relations, admitted that there was “another offer on the table.”

Donatelli also said he expects HP’s relationship with Hitachi would continue. “There is always going to be overlap in storage solutions. That’s been happening for the past 20 years and I don’t have any concerns about it. I actually view that as a positive because it makes sure you have a seamless offering and that you don’t have any competitive gaps.”

He also said HP “looks forward to the response” from Dell.

Dell declined to comment on HP’s counteroffer.

For the full story on the HP-3PAR-Dell triangle, see “HP, Dell in Bidding War for 3PAR.”

You can hear a replay of the conference call/webcast on HP’s website.

Like Cisco, Brocade Falls Short

Cisco’s Q4 sales fell short last week and Brocade followed suit with its Q3 earnings, missing analyst forecasts and lowering its revenue expectations for its fiscal year. But why?

Some industry insiders think customers are biding their time as they watch how the whole converged networking/unified fabric push plays out.

In a statement regarding Brocade’s (NASDAQ: BRCD) earnings, CEO Michael Klayko said, “Q3 was another solid quarter for Brocade in which we achieved better-than-expected results from our storage area networking business and continued to make progress in our Ethernet go-to-market initiatives. As we look to Q4, we expect a strong finish to our fiscal 2010. Despite operating in a challenging global economy with variable IT spending patterns, we are confident that our sales and marketing strategies as well as our product portfolio are aligned well with customer imperatives.”

Cisco’s (NASDAQ: CSCO) CEO John Chambers also cited uncertainty in the economy as well asmixed signals in the market and customer expectations as the reason for Cisco’s Q4 sales miss. However, Chambers said he’s confident that Cisco will succeed by continuing to “aggressively move into new areas where the network is becoming the platform.”

Brocade’s Numbers:

- Q3 revenue was $504 million, increasing approximately 1% sequentially and 2% year-over-year.

- Q3 GAAP EPS (diluted) was $0.05, sequentially level, and increasing from a loss in Q3 2009.

- Q3 non-GAAP EPS (diluted) was $0.13, sequentially level, and increasing 8% year-over-year.

- Q3 non-GAAP operating margin was 17.3% versus 20.5% in Q2 2010 and 20.3% in Q3 2009.

- Q3 effective GAAP tax rate was (220)%; non-GAAP effective tax rate was 0.2%.

- Q3 Adj. EBITDA was $102 million, down from $116 million in Q2 2010 and $119 million in Q3 2009.

- Q3 total Storage Area Networking (SAN) port shipments were approximately 1.0 million.

For the full Q3 financial results, including prepared comments from Brocade executives, go to http://www.brcd.com.

For more earnings news, check out Dave Simpson’s blog on NetApp’s Q1 bonanza.

The Battle for OpenSolaris

All's been quiet on the OpenSolaris front since Oracle's acquisition of Sun, but there's a reason for that. The company has been focused on getting Solaris 11 out the door, according to John Fowler, Oracle's executive vice president of systems.

Fowler led a webcast earlier this week in which he outlined Oracle's Systems Strategy roadmap, including its plans for tape, ZFS, and the continued evolution of the Exadata database machine. It was nothing we haven't heard before. What was interesting, however, was the live chat session that ran alongside Oracle's webcast.

Tweet-chants like "Oracle needs to communicate with the OpenSolaris community!" came fast and furious as Fowler detailed Oracle's roadmap, including next year's release of Solaris 11, which is said to include a number of technologies developed by the OpenSolaris community.

Fowler admitted to sister site InternetNews.com that Oracle has "been a little quiet on the open source front. It's not that we're not investing in Solaris, we're just investing to make sure that we have all the major components for the new release."

Fearing the worst for OpenSolaris, a new open source community has formed to provide alternatives to the closed components of OpenSolaris. The community, dubbed the Illumos Project and spearheaded by Nexenta Systems' new senior director of engineering Garret D'Amore, a former Sun engineer and a leading contributor to the OpenSolaris operating system for the past five years, claims that the core concern of the OpenSolaris community is that critical components of the platform aren't open at all.

However, D'Amore maintained Illumos is not an Oracle competitor. "We would love to have Oracle and its employees as peers. They can't own it, but they can participate. We want the technology to be usable by Oracle and taken back upstream," he said. "We want to create the insurance that the industry desperately needs in case the tap gets shut off."

There's a subplot to this drama. The underpinnings of Nexenta Systems' NexentaStor software are based on the OpenSolaris ZFS file system, which is at the center of a years-long legal battle between Oracle-Sun and NetApp.

NetApp fired another salvo recently by threatening to take legal action against Coraid, a storage startup that was about to begin selling NAS products based on Nexenta's technology. The NetApp legal threat stopped Coraid in its tracks.

Illumos has its own plans for ZFS. "At the moment, the code is identical. In the future, there may be additional enhancements and innovations in Illumos beyond what Oracle has. We have some concrete ideas we are exploring, but we're not quite ready to provide concrete details yet," D'Amore said. "We want to be a self-hosting Solaris derivative without any corporate dependencies. In my ideal world, anybody could use this code for whatever they want."

It seems to me that the concerns of the Illumos folks may be valid. In recent months, Oracle has forced Lustre users to buy Oracle hardware if they want to continue to be supported, as well as shut down servers Sun Microsystems was contributing to the build farm for PostgreSQL, the open source database software.

IBM to Acquire Storwize

Sometimes the rumor mill gets it right. IBM made another move in the storage optimization space with the acquisition of Storwize, adding real-time compression to Big Blue’s arsenal.

The announcement, first reported by WikiBon’s Dave Vellante and followed shortly thereafter by an IBM press release, came amid a solid month of rumors about the potential deal and speculation spiked when Dell announced plans to buy Ocarina Networks last week.

Financial terms of the IBM-Storwize deal were not disclosed, but there are some numbers being bandied about.

Read more at Enterprise Storage Forum, "IBM to Buy Storwize for Real-Time Data Compression".

EMC breaks Q2 revenue record

July 21, 2010 -- Led by customer demand for its high-end Symmetrix portfolio, Avamar and Data Domain product families, and VMware, EMC has reported record financial results for the second time in as many quarters with consolidated revenue for Q2 hitting $4.02 billion, an increase of 24% compared with the year-ago quarter.

According to EMC (NYSE: EMC), GAAP net income attributable to EMC increased 108% year-over-year to $426 million; and GAAP diluted earnings per share were $0.20, up 100% year-over-year. Non-GAAP net income attributable to EMC for the second quarter was $596 million, an increase of 66% compared with the year-ago quarter, and non-GAAP earnings per diluted share were $0.28, an increase of 56% year-over-year.

During the quarter, EMC achieved all-time record year-to-date operating cash flow and free cash flow of $2.1 billion and $1.6 billion, which grew 44% and 47%, respectively, compared with the year-ago period.

The company completed the quarter with $10.3 billion in cash and investments.

EMC has reported growth in several areas. Here are the Q2 highlights:

• The high-end EMC Symmetrix storage product portfolio increased 32% compared with the year-ago quarter and the EMC mid-tier storage product portfolio grew revenue 33% year-over-year.

• The combined second-quarter revenue run rate for EMC Data Domain and Avamar backup solutions exceeded the billion-dollar revenue run rate the company reported in the first quarter of 2010.

• VMware (NYSE:VMW), which is majority-owned by EMC, contributed second-quarter revenue of $673 million, increasing 48% compared with the year-ago quarter.

• Additionally, EMC's RSA information security solutions grew revenue 18% year-over-year.

EMC consolidated second-quarter revenue from the United States reached $2.1 billion, an increase of 28% year-over-year, representing 53% of consolidated second-quarter revenue. Revenue from EMC's business operations outside of the United States reached $1.9 billion, an increase of 19% year-over-year, representing 47% of consolidated second-quarter revenue. Within this, revenue increased 18%, 20% and 22% year-over-year, respectively, in EMC's Europe, Middle East and Africa (EMEA); Asia Pacific and Japan (APJ); and Latin America regions.

EMC's revised outlook

EMC also announced that it expects to exceed its previous outlook for 2010 revenue, consolidated GAAP EPS and consolidated non-GAAP EPS.

EMC's CFO David Goulden said:

"Moving forward, we remain confident that we have the right business and operating model to continue delivering annual double-digit revenue and earnings growth over the long term."

For 2010, EMC expects to exceed its previous outlook of $16.5 billion in revenue; $0.84 in consolidated GAAP diluted earnings per share, and $1.18 in consolidated non-GAAP diluted earnings per share, which excludes the impact of restructuring and acquisition-related charges, stock-based compensation expense, and intangible asset amortization.

More info can be found on EMC's website.

For the latest news on EMC:
EMC Doubles Performance of Midrange Data Domain Systems
Top Ten Revelations from EMC World
EMC Sees SSDs, Ethernet Taking Over Data Storage
Deduplication, Storage Tiering and VPlex Star at EMC World
EMC Mozy Speeds Up Online Backup, Adds Local Disk
EMC, NetApp Strike Storage Networking Deals
EMC Says Private Clouds Are the Future of Storage, Data Centers
EMC Keeps Storage Networks Up and Running
EMC Buyer's Guide: EMC Goes x86

Open season on open-source ZFS?

July 8, 2010 -- A one-page legal letter from NetApp has sparked a debate over the use of open-source ZFS technology and put at least one storage startup in a bit of a bind.

Earlier this week, Coraid informed its customers that it has suspended sales of its recently announced EtherDrive Z-Series NAS appliances, which are based on ZFS. The decision was made after Coraid received a "legal threat letter" suggesting that the open-source ZFS file system planned for inclusion with the EtherDrive Z-Series infringes NetApp patents (see "NetApp threatens Coraid over sales of open-source ZFS technology").

So why single out Coraid? The Z-Series NAS solution is based on Nexenta's software, but, according to Nexenta, the company "has not at this time received communications yet from NetApp."

Enterprise Strategy Group senior analyst Terri McClure wonders why NetApp didn't hit Nexenta with the same letter since Nexenta supplies its ZFS software to multiple storage vendors.

"If NetApp did it would make sense – stop a number of vendors instead of just one. It certainly makes you wonder why they would single out Coraid, people could read into this that NetApp sees Coraid as a threat. Coraid's NAS product is pretty new but the underlying platform has been on the market a while and is solid, at a really aggressive price point," said McClure.

"[NetApp] just spent a couple of hundred dollars in lawyer's fees and took a competitor out of the market. Quick and easy, but a little disappointing, too. At the end of the day, ZFS is open source, and while there is no way to predict how the settlement talks between Oracle and NetApp will turn out, you can't really un-open source ZFS," she said.

There's still no word from NetApp on the matter.

Nexenta CEO Evan Powell supplied Enterprise Storage Forum with the following statement:

"I am not a patent law expert and cannot comment specifically on NetApp and Oracle's legal battle. However, I find NetApp's behavior consistent with what typically transpires when established legacy technology companies are confronted with innovation that threatens their price structure and profit margins. They first protest that the technology is unproven and unstable, then it lacks enterprise features, then adequate support and services and finally, when all else has failed, that it is violating their intellectual property. This is the path that NetApp has taken in the last two years with the ZFS file system.

"Based on the explosive and sustained growth in adoption of Nexenta's Open Storage software based on the ZFS file system, it is clear that our partners and customers are confident that this case will reach a settlement that follows the trajectory of almost every technology market in the last 15 years-- low cost, high innovation and open solutions that provide a clear and competitive alternative to closed, proprietary and expensive technologies."

You can read more from Nexenta's Powell in his latest blog post.

Related articles:
Coraid Combines ZFS With Ethernet SAN Technology
Coraid Delivers EtherDrive Storage Arrays, HBAs
Nexenta Leverages OpenSolaris and ZFS for Enterprise Storage
Compellent Offers Open-Source ZFS-based NAS
Nexenta Adds Data Dedupe to NexentaStor 3.0 with ZFS
10 Reasons Why ZFS Rocks

Storage lessons learned from the dot-com era

June 18, 2010 -- We're 10 years removed from the dot-com era and the storage landscape barely resembles that of a decade ago. At this week's BD Event here in Boston, Peter Bell, a General Partner at Highland Capital Partners, gave advice to storage startups and recounted some of the lessons learned from his time at the helm of StorageNetworks, the first–and–last of the true storage service providers (SSPs).

Bell was the co-founder, Chairman and CEO of StorageNetworks, were he guided the SSP from concept to a huge IPO in June of 2000, raising more than $700 million in funding along the way.

But, in 2003, the way-before-its-time SSP model (can you say cloud?) failed. StorageNetworks closed its doors and its competitors shifted to a software model or vanished into the ether (from the way-back machine, see: "The last–and first–SSP calls it quits").

In his current role, he represents Highland on the boards of Desktone, ExaGrid Systems, Gigamon, InXpo, Ocarina Networks, SCVNGR, Virtual Computer, VMTurbo, and is actively involved with a number of Highland's other investments.

Bell said the funding for storage startups just is not the same today.

"No startup is immune to what's going on in the market. The venture capital dollars going into software and networking startups in 2000 were about $35 billion. In 2009 they were $4 billion," he said. "The lessons learned from StorageNetworks are still relevant today. We raised $700 million in 21 months, but I don't think you can do that today."

Taking a startup public is a much longer process these days. Bell said it takes about 10 years, double the average length of time it took to go public during the dot-com boom. "It takes a lot longer and [a startup] needs to be bigger and raise more capital to reach an IPO."

Bell bets there are storage vendors out there that have filed S1s, but are waiting for the economic climate to improve before they take the plunge. There is an added bonus for the lucky few who reach an IPO. Bell said valuations are higher to the tune of about 25%.

Most startups, he said, look to acquisition as the most likely path to growth/exit strategy.

It's not all doom and gloom. Bell is still bullish on the storage market. "In 2008, it was virtually impossible for a tech startup. 2010 has been a little better, but it's still tough," he said. "But people are addicted to storage and it's legal. There aren't that many businesses out there like that."

Bell points to companies who have been acquired or are experiencing growth like Acopia, Compellent, Diligent, Data Domain, EqualLogic, Isilon, Onaro, and XIV, as recent "winners" in the storage market.

Storage startups looking for an angle should consider a few hot technologies as their foot in the door. Bell believes solid-state storage, automated tiering, open-source storage, video storage and, of course, cloud storage/virtualization, are the next big things.

Bell emphasized the importance of the management team and business model as the keys to raising venture capital.

"It's the company you keep. Pick your partners and executives very, very carefully. The business model is as important as your team, but it's often not given enough thought," said Bell. "Long, unpredictable sales cycles lead to very short CEO tenures."

Related articles:
F5 to buy Acopia for file virtualization
Compellent adds ZFS-based NAS
IBM acquires Diligent for de-duplication
NetApp bows out, EMC to acquire Data Domain
Dell to acquire EqualLogic for $1.4 billion
Isilon adds enterprise features to scale-out NAS
NetApp expands SAN strategy with Onaro acquisition
IBM buys XIV for fixed digital content