EMC is buying Isilon to continue it’s position as #1 in storage virtualization.  Under terms of the agreement, EMC will pay $33.85 per share in cash in exchange for each share of Isilon for an aggregate purchase price of about $2.25 billion, net of Isilon’s existing cash balance.

The boards of directors of both EMC and Isilon have unanimously approved the terms of the agreement. The transaction, which is subject to customary approvals, is expected to be completed late this year, is not expected to have a material impact to EMC’s full-year 2010 GAAP and non-GAAP diluted EPS and is expected to be accretive to EMC’s non-GAAP 2011 diluted EPS.

The combined synergy of Isilon and EMC’s (Atmos) products is expected to reach over $1 billion run rate of business in 2nd have of 2012.

Isilon is known as the leader and momentum player in the fast-growing “Scale-out NAS” segment.  Together, EMC’s Atmos and Isilon’s solutions will offer customers a highly scalable, low-cost storage infrastructure for managing “Big Data.”

Big Data is a term used to describe the massive amount of data produced by a new generation of applications in markets such as life sciences (e.g. gene sequencing), media and entertainment (e.g. online streaming), and oil and gas (e.g. seismic interpretation) to name a few.

Joe Tucci, Chairman and CEO, EMC Corporation, said, “The unmistakable waves of cloud computing and ‘Big Data’ are upon us. Customers are looking for new ways to store, protect, secure and add intelligence to the vast amounts of information they will accumulate over the next decade.  EMC, in combination with Isilon, sits at the intersection of these trends with leading products, solutions and services to help customers get the absolute most out of what cloud computing has to offer.”

Pat Gelsinger, President and COO, EMC Information Infrastructure Products, said, “EMC brings unique value to Isilon through our highly complementary portfolio, engineering depth, financial strength and global sales reach. Isilon will enable EMC to accelerate our storage revenue growth and serve our customers across a broader range of the storage systems market. EMC will invest in all aspects of Isilon’s business to accelerate growth and take advantage of the fast-growing market opportunity ahead.”

Sujal Patel, CEO of Isilon, said, “Our excitement about the opportunity to become part EMC’s world-class team cannot be overstated. EMC’s track record of successfully acquiring, integrating and growing leading companies and the complementary nature of our technologies are undeniable. I am most excited about Isilon’s ability to now leverage EMC’s unparalleled market reach and portfolio of leading technology assets to build on our already significant success in this fast-growing space. Together, Isilon and EMC are ideally positioned to take our company to the next level and accelerate Isilon’s growth and technology adoption by customers around the world.”

Growth In Cloud Is About Big Data & Scale – EMC Aggressively Leading The Market

Isilon headquarters. Photo credit: "Robert."

There is no doubt that EMC is pushing the envelope in M&A to establish a focus on private cloud scale. With Isilon EMC gets that “scale out” player in network attached storage.

EMC is head to head with Netapp. With Isilon EMC can go against Netapp in the midrange and compete with other players in NAS.

According to analyst Dave Vellante, founder of Wikibon, the move by EMC has implications for the other players in storage.

Dave writes on his blog today some insightful content…

NetApp – once again EMC is using all its weapons to compete with the smaller NetApp. NetApp is growing faster, gaining more share, has great momentum and EMC just keeps changing the game in an effort to stay ahead of NetApp. VMware, VCE, Data Domain and now Isilon – EMC is pulling out all stops to compete.

HP – Do you think EMC’s Rich Napolitano was paying attention when his former boss Dave Donatelli went out and bought Ibrix? You betcha.

IBM – What happened to SONAS – lots of fanfare earlier this year around what looked to be an interesting global clustered file system – not much happening in the marketplace.

BlueArc and DDN – The two main competitors to Isilon just got more interesting (and more valuable).

Customers – More EMC stovepipes but Isilon could be a unifying force. Those customers worried about doing business with smaller Isilon get a nice EMC blanket around them.

EMC CEO Joe Tucci’s message is pretty clear. He wants Cloud Computing + Big Data = EMC.

As I indicated before, this is actually a good use of cash. Share buybacks and dividends add no long term value to the business and R&D is risky. With Isilon, EMC is buying growth, it’s buying competitive position and it’s covering its butt on an aging midrange file business. While EMC can point to leading revenue shares in its file business the products were not viewed as simple to use and next generation. People will criticize EMC for writing checks instead of code but when you’re printing money the way EMC is, time-to-market is worth a lot.

My Angle: Storage is Still Sexy

Storage continues to be hot in the race to build out scalable cloud offerings. The moves recently by EMC indicate that the main storage vendors like Netapp and others have to review their strategies.

Netapp is going for a full rehaul or rip and replace of their technology while EMC is buying new technologies and companies. The benefit for EMC is speed with solutions today that reinforce their leadership in storage and positions them as a #1 in the virtualization game. The benefit for Netapp is that they hope to have technology leadership with their new offering.

Which approach will dominate? Adding current leading solutions verses a rip and replace? Both cost money EMC in terms of M&A and Netapp in terms of organic marketing. The danger to Netapp is that if they miss the market message and timing then sales will plummet. Netapp isn’t known as a great marketing company so I think they have some challenges. The danger to EMC is integration risk. EMC has proven that integration is part of their excellence with recent deals like Data Domain and Greenplum both firms all cite that EMC succeeds in the integration side of M&A.

Update:
At VMworld SiliconANGLE sat down with Isilon to talk about the future of cloud computing with their customers. Now they are part of history joining EMC to lead the effort in private cloud.

Watch live video from #theCube from SiliconANGLE.tv on Justin.tv