UPDATED 09:45 EST / OCTOBER 18 2010

Isilon Acquisition by EMC for Over $2 Billion, In Negotiations

Looks like  computer storage company Isilon may be in exclusive talks with EMC for an acquisition. “The deal will be done this year,” a source close to the situation said, according to a report in the New York Post this morning.

EMC covers roughly 20% market share in external storage, followed by IBM with 15%, then Hewlett-Packard and NetApp, says analyst Roy Kaushik.

Isilon has been looking for a buyer for sometime now, but none of the tech giants showed interest till later. Everyone had their eyes on 3PAR acquisition last month, won by HP at $2.38 billion.  This helped gain buyout interest in the cloud industry as a whole, and a number of players are being eyed for acquisitions now as well.  Isilon is a pretty hot commodity at this point, and gaining the interests of EMC is a validation in itself, especially as EMC has been pinned as an acquisition target by Oracle.

“Isilon is the ‘now’ storage company,” Dave Vellante, senior analyst and founder of Wikibon.org points out.  “It is one of the few storage companies with a true scale out NAS architecture and in my opinion, Isilon is best in class. The company delivers simpler storage by eliminating traditional LUN management and builds data protection into its OS.

“An EMC acquisition of Isilon would do three things in  my view. First it would pressure NetApp and other competitors to compete at scale – EMC would be the clear scalability leader. Second, it will totally change EMC’s block/file unification strategy, which is behind NetApp and give EMC a potential leg up for unified solutions, especially at scale. Finally, it will give EMC a rapidly growing revenue stream as Isilon’s 2-year growth rate is around 60%.”

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