NEWS

EMC Buys Avamar for $165M

Red Herring
November 1, 2006
Michael Cohn

Storage giant acquires firm that makes smarter backups.

EMC snapped up Avamar Technologies for $165 million Wednesday in a cash deal that will give the storage heavyweight access to cutting-edge backup technology.

Avamar is EMC’s twelfth acquisition this year, with the Hopkinton, Massachusetts-based company spending about $2.8 billion on its buying spree as it seeks to compete with other storage providers like Sun Microsystems.

Shares of EMC rose a penny to $12.26 in recent trading.

Irvine, California-based Avamar has developed backup technology that offers a “de-duplication” feature, allowing companies to avoid unnecessary backups of data and applications that are largely the same across various employees’ computers.

The privately held company, founded in 1999, also brings with it more than 400 customers, many of them in the financial services and banking space, including Goldman Sachs and Morgan Stanley, both of which have also invested in Avamar. Benchmark Capital, Lightspeed Venture Partners, and CMGI have provided Avamar with VC backing as well.

Despite the string of recent acquisitions, EMC views Avamar as a particularly notable one.

“This is a transformational acquisition,” said Mark Lewis, chief development officer at EMC. “Even if you want to back up everything, almost all the files you have on your PC are the same as on your neighbor’s PC. As you back up, very few of the files change. Avamar only stores the core one time, goes inside the file, and looks for redundancies at the byte block level.”

With Avamar’s technology, EMC will be able to provide a disc-based data vault system that “de-duplicates” information, with the potential to eliminate redundancies, and thus save on storage space, at ratios of up to 300 to 1.

“We believe this software acquisition is indicative of EMC’s continued efforts to expand its software competencies, particularly for next-generation technologies,” wrote Robert W. Baird & Co. analysts Daniel J. Renouard, Frank Timons, and Joel Inman in a research note. “We view the technology as an attractive feature to add to EMC’s broad storage software portfolio.”

Getting Further into Compliance
Avamar also gives EMC even better entrée into the compliance applications being demanded of many companies, especially in the financial services field.

“We leverage the data for search to address the legal and regulatory compliance that you can’t get with traditional backup and recovery,” said Jedidiah Yueh, founder of Avamar. “We’ve had tremendous success on Wall Street, and also with manufacturing and other verticals.”

EMC already counts financial services as the No. 1 vertical sector among its customer base, according to Mr. Lewis. But besides the 400-strong customer list, Avamar also brings an intellectual property portfolio. Mr. Yueh said the company has already been awarded five patents in the United States and has another six pending.

However, Avamar isn’t the only company offering incremental backup technology. Competitors include IBM’s Tivoli Storage Manager, Symantec’s NetBackup, Hewlett-Packard’s OpenView Storage Data Protector, as well as products from CommVault and CA.

Mr. Lewis said EMC plans to retain all of Avamar’s employees as well as its facility in Irvine. The company will be integrated into EMC’s storage product operations group within the information management group.