Cisco Paying $415 Million for Storage System Startup Whiptail

Andrew Klips |

Networking giant Cisco Systems Inc. (CSCO) said on Tuesday that it has agreed to pay $415 million in cash, plus retention-based incentives, to buy Whiptail, a five-year old firm that makes scalable, solid-state memory systems to manage flash storage in the cloud.  The Cisco deal is emblematic of a broader movement toward consolidation in the data storage space, following Western Digital Corp.’s (WDC) announcement on Monday that it is buying solid-state storage company Virident for $685 million in cash.  It is also likely to ratchet-up tensions between Cisco and its partner, data storage maker EMC Corp. (EMC) .

The move by Cisco, one of the world’s biggest providers of X86 servers, is its first foray into the enterprise storage industry as it aims to strengthen its Unified Computing System by marrying solid-state memory with its UCS fabric computing architecture.  Headquartered in Whippany, New York, Whiptail has built its system using flash memory chips, which let data flow much more quickly and efficiently through servers, and allow for more data to be stored with less space and, thus, better performance.

Whiptail has a series of all-flash arrays called Accela, Invicta and Invicta Infinity, as well as an operating system named Racerunner.  It competes with companies like Violin Memory, which filed on August 26 to raise up to $172.5 million in an initial public offering.  Violin Memory is owned in part by Toshiba Corp. ($TOSYY).



"We are focused on providing a converged infrastructure including compute, network and high performance solid state that will help address our customers' requirements for next-generation computing environments," said Paul Perez, vice president and general manager of Cisco Computing Systems Product Group.  Upon completion of the acquisition, which is expected in first quarter of fiscal 2014, Whiptail employees will become part of the group headed by Perez.

The Chicago Tribune cited sources close to the matter who intimated that Whiptail has revenue in the range of $20 million to $30 million.

"As we continue to innovate our unified platform, WHIPTAIL will help realize our vision of scalable persistent memory which is integrated into the server, available as a fabric resource and managed as a globally shared pool,” added Perez.

The acquisition may be interpreted as a retaliatory shot at EMC by Cisco.  Last year, EMC bought Israeli flash-storage startup (and Whiptail competitor) XtremIO for $430 million.  Also last year, VMware Inc. (VMW) , of which EMC is the majority owner, shelled-out $1.26 billion to acquire Nicira.  Nicira had rapidly emerged on the scene with next-generation networking technologies, which meant less reliance by EMC on Cisco products, and created direct competition for users.

Regardless of how gratuitously the long-time partners of Cisco and EMC wish to speak about each other, Cisco effectively just told EMC – and NetApp (NTAP) too for that matter  - that they’ll be able to get by just fine without their flash-storage services.

With the recent acquisitions adding to the stack of moves in the past year for companies to bolster offerings to give their customers more robust products and the “acquirees” commanding big prices, a fair question here certainly would be, “Who’s next?”

Shares of CSCO have climbed 1 percent in Tuesday trading to $24.16.  The news didn’t have a negative effect on EMC; shares are up nearly one percent as well.

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Companies

Symbol Name Price Change % Volume
VMW Vmware Inc. Class A 94.25 0.34 0.36 819,810 Trade
CSCO Cisco Systems Inc. 33.75 0.35 1.05 26,639,030 Trade
WDC Western Digital Corporation 85.71 1.10 1.30 6,021,592 Trade
NTAP NetApp Inc. 39.76 0.13 0.33 2,315,045 Trade
EMC EMC Corporation n/a n/a n/a 0 Trade
NFGRF Beijingwest Inds Intl Ltd 0.18 0.00 0.00 0

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