EMC’s Acquisition Strategy: New Insights from Data Domain (and Rumored Isilon Deal)
EMC, the data storage giant, has lots of irons in the fire when it comes to innovation. The Hopkinton, MA-based firm (NYSE: EMC) pursues an interesting mix of acquisitions and “organic” in-house research and development.
A few weeks ago, I spoke with EMC’s chief technology officer, Jeff Nick, about the company’s broader innovation strategy—which can be a tough thing for an outsider to grasp, especially when you’re talking about a 45,000-person company. But one big piece of EMC’s approach is to acquire other companies in strategic market positions. So I wanted to drill down into the firm’s specific approach when it comes to these mergers and acquisitions.
One potentially huge deal has been widely rumored for the past month: the prospect of EMC acquiring Seattle-based Isilon Systems (NASDAQ: ISLN). A report in the Wall Street Journal late last week said EMC “has cooled its interest” in Isilon, but that an agreement is still possible. It sounds like Isilon’s high stock value ($27.95 at Friday’s close) has driven up its asking price (rumored to be over $2 billion). The companies aren’t talking publicly about any such deal, of course, but outside sources tell me it is still likely to happen, because Isilon’s technology fills an important hole for EMC (networked-attached storage) in its competition with other storage companies like Silicon Valley-based NetApp (NASDAQ: NTAP).
EMC wouldn’t make any specific comments about Isilon, but the firm did speak with me about its M&A strategy more broadly—and about its acquisition of Santa Clara, CA-based Data Domain last year, which also went for $2 billion. “EMC has a long acquisition history and track record,” says Matt Olton, vice president of corporate development at EMC. “We’ve learned our lessons about what works and what creates more challenges.”
A caveat: EMC is “often viewed as a very acquisitive company,” Olton says, “but you’ll see investments in R&D equivalent to our acquisition spend.” Not many tech companies can focus on both internally and externally driven innovation on a large scale, says Olton, an 11-year veteran of the firm who works with a core team of about a dozen members, plus a much larger virtual team that cuts across all business functions.
To help frame EMC’s approach, Olton says any successful M&A practice boils down to five points:
—A core strategy that works. It doesn’t have to be the best strategy in the world, so long as it can be executed, he says. (I took this to mean everyone needs to be on the same page, even if it’s not the perfect page.)
—Evaluation discipline. This means having the patience to pursue fewer transactions, … Next Page »