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ECommerceTimes.com

IBM's $1.7B Netezza Acquisition May Not Be Done Deal

By Erika Morphy
Sep 20, 2010 12:19 PM PT

IBM has made a US$1.7 billion offer to acquire Netezza, a data warehouse specialist that allows users to analyze huge amounts of data very quickly by integrating hardware with analytics applications.

IBM's $1.7B Netezza Acquisition May Not Be Done Deal

Since IBM announced its offer, Netezza's stock price has risen past the $27 per share price it reflects. That could signal a bidding war ahead.

"Storage and its related activities are very hot right now," said Roger Kay, principal of Endpoint Technologies Associates.

3Par, a company offering a related technology with its virtualized data storage product line, was recently acquired by HP after a very expensive bidding war with Dell.

Larger Narrative

Underlying the Netezza and the 3Par deals -- as well as the growing valuations of other storage providers such as Compellent Technologies, CommVault, Isilon and Teradata -- is the virtualization of computing assets, Kay told the E-Commerce Times.

"What is happening is that companies want to control all of their assets at a virtualized level, and vendors are responding," he explained. "As a result, storage has gotten blended into the enterprise products that are now being rolled out."

Netezza's ability to procure and crunch data quickly plays into that, as it allows companies to operate with less -- and more flexible -- data storage space, explained David Bernard, managing director of DB Marketing Technologies.

"While powerful database systems were always needed alongside analytics software to perform customer analytics, the exponential growth of businesses' appetite for customer insight has driven the need for infrastructure that is optimized for analytics," Bernard told the E-Commerce Times. "Databases focused on simply the storage of data are no longer sufficient."

A hardware appliance that enables the user to optimize results for faster analytics will fit well into IBM's analytics portfolio, Judith Hurwitz of Hurwitz and Associates told the E-Commerce Times.

"Analytics is a key piece in IBM's information management area. so anything that accelerates the ability to compute analytics faster is a strategic acquisition for them," she said.

Bidding War?

The question is will IBM wind up overpaying for the company as HP did with 3Par? IBM will be well positioned for a bidding war, should it arise, Kay said, but -- to state the obvious -- not overpaying is better than overpaying.

It has far more in short-term assets than most possible contenders, such as HP or Dell, he noted.

The market seems to be very bullish on storage assets right now, which could indeed lead to a bidding war, Kay remarked.

However, the fight for 3Par was in some respects non-economic in nature, though, he continued. "I had originally thought HP would sucker punch Dell by bidding up 3Par and then sticking it with the higher tab."

Whether a company is willing to do something similar to IBM -- and has the cash on hand to do it -- is an open question, Kay said.

Oracle in the Mix?

Oracle is a possible contender for the asset, if only to thwart IBM's acquisition, said Rob Enderle of the Enderle Group.

With its acquisition of Netezza, IBM is effectively putting Oracle on notice that the fight for the top spot in software-led large enterprise data products will be contested, he told the E-Commerce Times.

"Analytics go to the core of managing large systems and ensuring they are both efficient and profitable. A good analytics platform can dictate the software, and the software the hardware that goes around the resulting solution," Enderle explained, "so it is a strong keystone to both securing and retaining large customers."


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