F5 Networks has moved into the storage space with the $210m cash acquisition of Acopia Networks, which offer file virtualization software and was originally due to IPO this year.
CEO John McAdam described the deal as complementary to F5’s strategy of optimizing the application infrastructure from the core of the datacenter to the edge of the network. Acopia extended the application delivery network’s reach to include optimization of the data storage layer.
While acknowledging that big server vendors such as EMC and Brocade had similar software, F5 believes that the advantage of Acopia software was its ability to operate with heterogeneous storage devices, rather than those from one vendor.
McAdam claimed not to know why Acopia has not held an IPO but the fact that F5 estimate that it will add $25m to $30m to its top line in 2008, suggests it had insufficient traction in the market to appeal to public investors. A trade sale was the most attractive exit strategy to venture capitalists who had invested at least $85m in the Lowell, Massachusetts-based company.
F5 described file virtualization as an exciting and largely untouched market. It quoted research by IDC that found that IT executives were increasing deployments of file-based storage by 50% to more than 200% a year as they consolidated existing data centers and rolled out new fixed content applications.
By providing a single namespace that gives access to heterogeneous files systems, Acopia decouples access to files from their physical location. It also claims the advantage of non-disruptive data migration, automated storage tiering, dynamic load balancing and efficient data replication.
Inevitably, McAdam was asked whether Cisco’s decision to pull NeoPath Networks entire range of NAS virtualization products from the market shortly after it had closed its acquisition of the start-up in April this year did not offer a cautionary tale to those thinking of entering the market.
But F5 pointed to Neopath’s puny customer base and drew comfort from the fact that its due diligence process included interviews with some of Acopia’s 100-strong customer base, a third of which are Fortune 1000 companies. They were apparently delighted with the performance of its software and gave F5 the confidence to proceed with the deal.
The market was unconvinced as to the value of the acquisition and F5 stock lost 6.85% to $77.95.