Originating Author: Dave Vellante
Hitachi Data Systems (HDS) announced today in a morning conference call that it is acquiring Archivas, Inc., a Waltham, Ma developer of digital archiving storage solutions. HDS and Archivas have been partnering in this space since late 2005 but it's been a quiet marriage with reports of slow traction within the HDS sales force.
Why Archivas? Two reasons:
- Archivas has the archiving services including the technology of document and metadata ingestion, authentication, security, retention, deletion, etc. HDS' HCAP architecture elegantly allows the separation of hardware from storage services supplied by Hitachi or 3rd party partners like Archivas. This is truly important in a marketplace where the archived data assets will very likely outlive the platform on which they're currently stored.
- The market is hot. ESG analyst Tony Asaro intimated on the call that the market size is greater than $1B and HDS showed some IDC and other data suggesting that 80% of stored information is unstructured content (how come the market is only $1B if that's true?). The big player is EMC and HDS wants a share. By all accounts this market is growing, driven by demands for compliance and applications such as email archiving, ediscovery and search.
Why Now? Perhaps a more interesting question. Archivas is backed by some sharp investors, including Polaris Ventures and North Bridge and has raised $28M since inception in 2003. Archivas closed a $12M Series C round in February 2006 and with still small revenue was likely starting to assess its options for another cash infusion. It could be that Polaris and company were shopping Archivas and had some bites. HP's acquisition of HDS partner AppIQ, while a financial win for minority investor HDS underscored the drawbacks of not being an aggressive buyer of key partner technologies.
It's very possible HDS felt it couldn't afford to lose out again and from the investors' standpoint there's little doubt HDS would perceive this investment as 'strategic' and be willing to pay more than other acquirers who might use more traditional valuation methods.
Reports have surfaced that HDS paid as much as $120M for Archivas or 4X the $28M investors put in. This sounds absurd (for a company that probably has single digit revenues) and makes NTAP's valuation look paltry. We'll continue to dig for better data points or confirmation of HDS' lack of traditional financial conservatism (aka insanity).
$120M sounds really high
How big is Archivas? $5M in revenue maybe? That would be a 24X revenue valuation. What's Netapp trading at? 7X revenue. I would guess maybe 4X the Series A or $24M with some milestones. Or maybe even 4X the cumulative up to Series B ($16M), which would be $64M (still high but maybe easier to swallow).
Anybody know how many employees Archivas has? Were they running out of cash?
I believe Archivas has something like 60 or 70 employees but I'm not positive. I doubt they were running out of cash although they probably didn't have enough revenue to sustain them. They would have had to do another raise I would guess late this year. Polaris didn't have any announcement on its Web site which is surprising.
I don't see many customers out there using this platform but I think it's a good move for HDS because they have to compete in the compliance space.
A crowded field
There is a crowded field of runners in storage archiving. Here are just some of the vendors.
- EMC Documentum & Centera products
- EMC's DiskXtender file system archiving software
- Fortiva Email archiving
- HP Email archiving RISS solution
- IBM System Storage Archiving Manager
- KOM Networks
- MailMeter Email Archive
- Mimosa Systems
- NetApp WORM functionality on filers
- Symantec Enterprise Vault software
- Veritas KVS software
- Zantac Archiving
Hitachi should be aiming to integrate Archivas into their Service Orientated Storage Strategy, so that application owners can choose the what data is archived and include this function in automated storage management processes.
This is a big market. HDS doesn't really play here yet but it's being driven by corporate CYA. This is a sell to the lawyers as much as it is to IT people. -Kdas