EMC Corp. (EMC) is on an acquisition spree. Recently, the leading storage vendor announced the acquisition of Montreal based privately-held Watch4Net Solutions Inc. in an all cash transaction. Just a week ago, EMC acquired Syncplicity, a privately-held software–as-a-service (SaaS) provider, in order to boost its cloud-based storage offerings. To date, this is EMC’s fourth acquisition in 2012.
Watch4Net offers solutions that measure the performance of networks, data-centers and cloud based infrastructures. The company has been EMC’s partner over the last seven years and its flagship APG product is integrated with EMC’s IT Operations Intelligence suite. The solution provides reports on a real-time, historical and projected basis, which helps an IT administrator to detect and troubleshoot a potential problem.
EMC said that the transaction will not have any material impact on fiscal 2012 results. We believe that the acquisition will expand EMC’s software offerings in the data center information management market going forward. Other than its solutions for managing networks and physical and virtual storage, we believe that Watch4Net products will help EMC provide a complete end-to-end cloud based solution to enterprises going forward.
EMC’s aggressive acquisition strategy has proved beneficial in the past, being largely responsible for the company’s market position. Acquisitions have helped the company to enhance and expand its information storage, content management and archiving segments. Over the last couple of years, EMC has made important acquisitions that enhanced its security offerings, data clouds & analytics and storage systems.
With the advent of big data and cloud computing, EMC had been focusing on acquiring companies with strong presence in these two fields. According to market research firm IDC, the Big Data market is expected to reach $16.5 billion by 2015, growing 40% annually from $3.2 billion in 2010. According to Forrester, the global market for cloud computing will grow from $40.7 billion in 2011 to more than $241.0 billion by 2020.
Over the last few years EMC acquired tools such as Avamar and Data Domain that help enterprises to manage huge amount of data through data deduplication. In 2010, the company acquired Isilon systems that boosted its presence in the fast growing Network attached storage systems. EMC also acquired Greenplum for big data analytics in 2010. In March this year, EMC acquired Pivotal Labs, a provider of agile software development services and tools, to boost its offerings in the big data segment.
We expect EMC to continue making accretive acquisitions, which will help it to penetrate the fast growing markets of big data, cloud computing, mobile and security applications over the long term. Moreover, we believe that the most-recent acquisition will provide EMC a significant competitive edge in these markets, where it faces stiff competition from Hewlett-Packard (HPQ), International Business Machines Corp. (IBM), Oracle Corp. (ORCL), SAP AG (SAP) and Dell Inc. (DELL).
However, the overall sluggish IT spending trend and lackluster North American and European growth remain potential headwinds going forward. Thus, we remain Neutral over the long term (6-12 months).
Currently, EMC has a Zacks #2 Rank, which implies a Buy rating in the near term on the back of strong results and strategic acquisitions.
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