EMC’s Acquisition Strategy: New Insights from Data Domain (and Rumored Isilon Deal)

11/8/10Follow @gthuang

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strong distribution network.” So far, so good—Data Domain’s growth has accelerated since the acquisition, Olton says. (One analyst estimated that the company’s revenue from Data Domain alone was $175 million in the second quarter of 2010.)

Indeed, according to a recent report by the M&A group Corum, the Data Domain acquisition is a “runaway success” that will lead to “a multi-billion dollar return to EMC investors over the next 5 years.” The report also predicts that EMC’s Backup and Recovery Systems division—newly formed from Data Domain and another acquisition, Avamar—could produce as much as 15 percent of the company’s total revenue in two to three years.

The Corum report attributes the deal’s success to three factors. One, EMC “bucked the trend” by making a very aggressive bid in the heart of the recession, thereby winning the deal from its competitor. Two, Data Domain’s market-leading deduplication technology (an advanced form of data compression) “has the potential to reshape the storage landscape” and also encourages more sales of EMC’s storage products. And three, EMC focused on integrating Data Domain very carefully—spending lots of time and money to align the businesses and retain key leaders.

As for the future, Olton says all innovation at EMC is tied to the firm’s main strategic direction—which is “a journey to the private cloud.” He’s talking about EMC’s corporate cloud computing strategy, which involves (I’m oversimplifying here) enabling companies to build their own cloud infrastructure, rather than using Internet-delivered services like Amazon’s or Google’s.

Olton and EMC wouldn’t talk about any impending acquisitions or potential targets, of course. In the end, on the topic of Isilon Systems, Olton had no comment other than, “They seem to be doing well.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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