EMC In Talks About Possible $2 Billion Bid For Isilon: Reports

Another blockbuster storage acquisition may be in the making as EMC is reported to be discussing a $2 billion bid for Isilon.

The New York Post reported late Friday night that EMC could close a deal to acquire Isilon by year-end, quoting unnamed sources.

EMC itself is still rumored to be the subject of an acquisition bid by Oracle, which is looking to beef up its storage offering.

Isilon, meanwhile, is on a short-list of potential storage acquisitions, especially after Hewlett-Packard beat Dell in a short but intense bidding war to acquire 3PAR, a developer of scalable Fibre Channel SAN technology.

Isilon develops scale-out NAS technology. The company's OneFS operating system allows customers to add storage nodes without disrupting storage operations up to a maximum of 10.4 petabytes in a single file system. Performance of the company's storage architecture also scales with the addition of storage nodes to up to 45 GBs per second.

Next: Analysts, Wall Street Like The Acquisition Possibility

Isilon shares were up over 1 percent at just over $28 per share near the close of Monday's trading day. However, the company's share price in the last five business days has jumped more than 10 percent, and is up over 300 percent from a year ago.

One analyst firm, RBC Capital Markets, on Monday wrote in a research paper about the potential acquisition that Isilon's scale-out NAS architecture could prove interesting to an enterprise IT systems vendor.

EMC is the most likely potential suitor of Isilon, wrote RBC. "EMC's Celerra NAS platform does not scale as efficiently and effectively as Isilon's architecture; thus, Celerra usually loses in competitive engagements on a price-performance basis. In addition, a purchase of Isilon would enable EMC to better compete against NetApp, particularly in virtualized server and desktop environments."

Stifel Nicolaus, a Baltimore-based equity research firm, wrote in a Monday research paper that Isilon, along with CommVault and Compellent, have consistently been on a short list of potential storage acquisitions, and that Isilon recently hired as an advisor the same company that advised Data Domain, which was acquired by EMC, and 3PAR, which was acquired by HP.

"Many have considered EMC to be a likely potential candidate to look at acquiring Isilon ... Isilon, which most notably competes with NetApp, is known as a leader in the clustered NAS market," Stifel Nicolaus wrote.

Next: Isilon's Partners Call Isilon A Good Company To Acquire

The majority of Isilon's sales goes through solution providers, a number of whom said Isilon would be a good company for someone like EMC to acquire.

Isilon was written from Day One to do high-performance scale-out NAS, said Mark Teter, CTO of Advanced Systems Group, a Denver-based solution provider and Isilon partner.

"If EMC acquired Isilon, it would give Isilon a broad reach into areas where EMC competes, notably against NetApp," Teter said. "Also, EMC's Celerra NAS products don't scale out, so Isilon would give EMC a technology boost."

Teter called Isilon's technology more disruptive than that of 3PAR, which last month was acquired by HP for $2.4 billion.

"With Isilon's OneFS file system, one storage administrator can manage multiple terabytes of storage," he said. "And for a company with no storage administrator, it's the perfect solution. A customer can be provisioning storage within one hour with Isilon. With other technology, it takes a minimum of five days."

Next: Isilon's Attractive Technology

While potential acquisitions have played a small part in Isilon's share price growth, Isilon's technology has been the primary factor, said Joe Kadlec, vice president and senior partner at Consiliant Technologies, an Irvine, Calif.-based solution provider and Isilon partner.

"Isilon has great technology," Kadlec said. "It's well positioned to be either a stand-alone company or an acquisition."

With Isilon, customers do not have to worry about major upgrades as storage technology improves, Kadlec said.

"As customers' technology ages, they can sometimes get tied down to older products," he said. "With Isilon, as parts of the infrastructure age, customers can peel those parts off and replace them without any disruptions.

Both EMC and Isilon declined to comment on the possible acquisition.