A rumor is circling Wall Street that FalconStor is pursuing opportunities to get acquired, according to our sources.  But there is no word on who may be represented on the other side of the negotiations table. That hasn’t stopped anyone from speculating, though.

FalconStor, a maker of data protection software for data centers, could be shopped to any number of storage firms with existing backup portfolios that would be able to take advantage of its software offerings.  This alone narrows down the list to about a dozen firms.

One of the first names that come to mind is CA. FalconStor CEO Jim McNeil sold Cheyenne Software to the software giant in 1996, and there’s a strong likelihood that some of his old contacts at the firm may be open to another proposal.

Hitachi Data Systems is another likely buyer: the company has a reseller agreement with FalconStor, and an acquisition would give it complete access to IP already incorporated into its portfolio.

Lenovo could also make use of FalconStor’s software, but the Chinese manufacturer recently committed to a multi-billion partnership with EMC, and it may have a hard time justifying an overlapping acquisition to its investors.  Imation is in a very similar situation – the vendor recently bought Nexsan, so it’s doubtful that management is eager to make another major investment.

On the other hand, NetApp, Dell, HP and IBM all have a strong presence in the backup market, as well as the budget to expand.  Reports, which we could not verify, indicate that Big Blue is engaged in talks with FalconStor “in a bid to control the virtual tape library (VTL) market.”   Some analysts speculate this is unlikely due to IBM’s strong data protection offering in the form of its Tivoli software suite.  

The last two companies on our potential buyers list are Xyratex, whose market cap is only twice that of FalconStor, and DataDirect Networks. A deal would be a risky step for the former, while the latter firm has historically stuck mainly to internal innovation and bleeding edge technologies.