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Issue Date: December 2010, Posted On: 12/6/2010

EMC buys Isilon Systems for $2.25B
Seattle company made name in scale-out storage products

By Martin Desmarais

EMC Corp. has agreed to acquire Indian-American founded Isilon Systems Inc. in a cash deal worth approximately $2.25 billion.

Hopkinton, Mass.-based IT giant EMC made the move in what it is calling an attempt to gain a foothold in the fast-growing “scale-out, network-attached storage systems” industry.

Isilon, which was founded by Sujal Patel and is headquartered in Seattle, Wash., has become known as a frontrunner in providing scale-out storage products. Recent reports by analysts have the particular storage segment on a project growth path of close to 40 percent annually. Research firm IDC predicts that the industry will reach an estimated annual worth of $6 billion by 2014.

EMC has agreed to pay a hefty sum to take on Isilon — paying $33.85 in cash per share of Isilon stock, which closed at just over $26 the day before the deal was announced on Nov. 15. Its stock has remained around $33 since the deal went public. The deal is expected to be completed later this year.

Both EMC and Isilon are publicly traded companies. EMC is traded on the New York Stock Exchange. Isilon is traded on Nasdaq. EMC reported $4.21 billion in revenue for the third quarter, up 20 percent compared to the year before. Isilon reported $53.8 million in revenue in the third quarter, up 19 percent from the second quarter and up 77 percent from the third quarter of 2009.

Patel started Isilon in 2001 and led the company as chief executive officer for several years before turning the reigns over to another executive. However, three years ago he returned as CEO to help pull the company out of a business tailspin, which seems to have been justifiably rewarded with the EMC deal. Currently, Patel is listed as company CEO and president.

According to Isilon, the company’s products help businesses focus on managing their data not their storage. “Isilon’s products are simple to install, manage and scale, at any size. And, unlike traditional architectures, Isilon stays simple no matter how much storage is added, how much performance is required or how business needs change in the future,” the company stated.

EMC is looking for Isilon’s products to complement its ability to develop and provide information infrastructure technology and products.

Together, EMC’s Atmos and Isilon’s products will offer customers low-cost storage infrastructure for managing “big data,” a term used to describe the massive amount of data produced by a new generation of applications in markets such as life sciences, media and entertainment, as well as oil and gas, according to EMC. The companies say their products will be used in both private and public cloud storage.

EMC said it expects the combined storage product line to generate $1 billion in revenue by the second half of 2012.

After announcing the deal, EMC also said it expects its 2010 revenues to hit $16.9 billion.

“The unmistakable waves of cloud computing and ‘big data’ are upon us. Customers are looking for new ways to store, protect, secure and add intelligence to the vast amounts of information they will accumulate over the next decade,” Joe Tucci, chairman and CEO of EMC said in a statement. “EMC, in combination with Isilon, sits at the intersection of these trends with leading products, solutions and services to help customers get the absolute most out of what cloud computing has to offer.”

“EMC brings unique value to Isilon through our highly complementary portfolio, engineering depth, financial strength and global sales reach. Isilon will enable EMC to accelerate our storage revenue growth and serve our customers across a broader range of the storage systems market,” added Gelsinger, president and chief operating officer of EMC’s information infrastructure products. “EMC will invest in all aspects of Isilon’s business to accelerate growth and take advantage of the fast-growing market opportunity ahead.”

Patel has said publicly that he expects Isilon to remain operating as a separate entity, led by him and the same currently leadership that the company has, as part of EMC’s information infrastructure products division.

Isilon has 500 employees. No comments have been made on any reduction in employees as part of the sale. EMC has more than 40,000 employees worldwide.

“Our excitement about the opportunity to become part of EMC’s world-class team cannot be overstated. EMC’s track record of successfully acquiring, integrating and growing leading companies and the complementary nature of our technologies are undeniable. I am most excited about Isilon’s ability to now leverage EMC’s unparalleled market reach and portfolio of leading technology assets to build on our already significant success in this fast-growing space,” Patel said in a statement. “Together, Isilon and EMC are ideally positioned to take our company to the next level and accelerate Isilon’s growth and technology adoption by customers around the world.”

Prior to his current role as Isilon CEO, Patel served as chief technology officer from 2001 to 2008. He served as CEO from the company’s start in 2001 till 2003.

From 1996 to 2001, Patel served in various engineering roles at RealNetworks Inc., in part as chief architect behind the company’s core media delivery system. Patel holds a number of patents and pending patents, including those for the Isilon One distributed file system. He has a bachelor’s degree in computer science from the University of Maryland at College Park.

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