HPE Acquires Zerto
For $374 million
This is a Press Release edited by StorageNewsletter.com on July 5, 2021 at 2:33 pmHewlett Packard Enterprise (HPE) entered into a definitive agreement to acquire Zerto Ltd, in cloud data management and protection, in a transaction valued at $374 million.
This acquisition expands HPE GreenLake and continues to deliver on HPE Storage’s shift to a cloud-native, software-defined data services business.
“Data is now the most critical asset,” said Antonio Neri, president and CEO, HPE. “With the explosive growth of data at the edge and across hybrid environments, organizations today face significant complexity in managing and protecting their data. Zerto’s market-leading cloud data management and protection software expands HPE GreenLake cloud data services, allowing customers to protect their data and rapidly act on insights, from edge to cloud.”
Accelerating and expanding GreenLake cloud data services
Zerto’s journal-based continuous data protection (CDP) technology includes disaster recovery, backup, and data mobility in a single, simple cloud data management and protection software solution that spans on-premises, hybrid, and multi-cloud environments. The data protection as-a-service market will grow from $7.7 billion in 2020 to $15.3 billion in 2024, representing a 19% CAGR. Zerto will be available as-a-service through GreenLake and Data Services Cloud Console.
“With data underpinning digital transformation, customers must manage, protect, and mobilize their data,” said Tom Black, SVP and GM, HPE storage. “Customers continue to face significant issues managing data complexity across hybrid and multi-cloud environments. Zerto further positions HPE to help solve these customer challenges and become the leader in data management and protection through HPE GreenLake cloud services.”
Zerto helps customers recover in minutes from ransomware, cyberattacks, and other unplanned downtime bringing data back to its original state just seconds before the attack or disruption. It also easily replicates and migrates data between VMware vSphere and Microsoft Hyper-V environments and natively to Amazon Web Services and Microsoft Azure.
Zerto brings additional talent and technology to HPE’s cloud data services;
HPE distribution and installed base accelerates Zerto’s scale
Founded in 2009 and co-headquartered in Herzliya, Israel, and Boston, Zerto’s approximately 500 employees serve more than 9,000 customers, including enterprises and 350 managed service providers. It is in the growing data replication and protection and high-growth disaster-recovery-as-a-service (DRaaS) market. The addition of Zerto will accelerate HPE’s R&D roadmap and transformation to become a leading data management and protection provider to customers. Zerto is expected to benefit by leveraging HPE’s global presence, distribution channel, and installed base. Together the two companies are a combination of technology, cloud operations, and go-to-market capabilities to simplify cloud data management and protection for customers’ edge-to-cloud strategy.
“The HPE GreenLake edge-to-cloud strategy and strong leadership is a perfect match for Zerto,” said Ziv Kedem, CEO, Zerto. “Coupling Zerto’s industry-leading cloud data management and protection software platform with HPE’s cloud data services and go-to-market reach will offer an unparalleled experience for our collective customers and partners.”
Transaction details
HPE is acquiring Zerto for $374 million in cash. The company plans to fund the acquisition through cash on its balance sheet. The transaction is expected to contribute more than $130 million in run-rate revenue at software gross margins. Approximately one-third of the revenue is expected to contribute to HPE’s as-a-service annualized revenue run-rate. The acquisition is also expected to be accretive to non-GAAP operating profit and earnings starting in FY23.
Zerto’s management team is joining the HPE family following the close of the transaction, which is expected to occur in HPE’s 4FQ21, subject to regulatory approvals and other customary closing conditions.
After the transaction closes, Zerto will be organized under HPE storage, reporting to Black.
Comments
A few days following the acquisition of Determined AI, HPE made a big splash this time with Zerto.
This is the 15th acquisition in the storage industry this year, a modest figure compared to 49 for 2020.
The price of $374 million can be compared to Zerto's total funding of $183.2 million from 14 investors here detailed round by round in $ million:
2010: $6.2
2011: $15
2013: $13
2014: $26
2016: $50 + $20
2020: $33 + $20
What could be the future or at least next step for Zerto? Recognized by the quality of its solution, the expertise of its team and its innovation in the domain, it was a constant surprise that nobody never really tried to absorb the Isreali gem. And that invited us several times to wonder the reasons behind that. And this is a bit paradoxal with the growing need for such data protection approach validated by the dynamism of that data management segment.
This move confirms that HPE is always looking for such opportunities, we should say bargains, as the transaction amount reaches $374 million which is around 2x the total VC money received by Zerto. The Kedem brothers founded the organization in 2009 and got $183.2 million in 10 rounds, including a debt facility. Zerto has announced a new round last year around April just after a RIF end of March that put a real pressure on the management. It was already an indicator of stress for the company. This ratio is almost ridiculous and shows a valuation curve that got reduced drastically over time. It illustrates the difficulties Zerto had for a few years without the capability to develop a better trajectory. At the end of the day, this exit is probably the best episode of what could happened to the company and such proposal, even at that ratio, can't be refused. Investors and Kedem brothers understand this as future could become even more fuzzy.
With that, HPE expects to consolidate its software-defined data services portfolio, leveraging an interesting network of MSPs, partners and clients, all very enthusiastics about Zerto technology. HPE GreenLake business, recently fueled by advanced announcements, continues to deliver value for the enterprise.
Zerto being already a HPE Complete partner, we anticipate some integration with HPE Cloud Volumes, the Catalyst API for Storeonce, Cloud-native applications and more globally in the cloud and SaaS offering with DRaaS for example.
HPE needs some other key components in its portfolio promoting its own products especially in file and object storage beyond strategic partnerships.
But this acquisition is also a bad news for all companies in the HPE ecosystem trying to convince the now Texan giant to swallow them. As said, bargains is what HPE targets, it was the case with SimpliVity, Nimble Storage, MapR, BlueData, SGI or even Cray and now Zerto, meaning that HPE is pretty frugal in term of investments and pay attention to real revenue stream and how the market adopts and reacts to trends, hype and hot technologies. We already published an article in May 2020, HPE Storage, Big Bazar or Real Strategy? Where is famous historical HP R&D?
Here is an updated selective acquisition table:
| Companies acquired | In |
Price ($ million) |
| Zerto | Jul. 2021 | 374 |
| CloudPhysics | Feb. 2021 | – |
| Silver Peak | Sep. 2020 | 925 |
| Scytale.io | Feb. 2020 | – |
| MapR | Aug. 2019 | – |
| Cray | May 2019 | 1.300 |
| QuattroLabs | Dec. 2018 | – |
| BlueData | Dec. 2018 | – |
| Plexxi | May. 2018 | – |
| Nimble Storage | Apr. 2017 | 1.090 |
| Cloud Cruiser | Jan. 2017 | – |
| SimpliVity | May 2017 | 650 |
| SGI | Aug. 2016 | 275 |
| Trilead | Feb. 2016 | – |
| Eucalyptus | May 2015 | – |
| Autonomy | Oct. 2011 | 11.000 |
| 3PAR | Sep. 2010 | 2.350 |
| Stratavia | Aug. 2010 | – |
| Ibrix | Aug. 2009 | – |
| LeftHand Networks | Oct. 2008 | 360 |
| Opsware | Jul. 2007 | 1.600 |
| PolyServe | Feb. 2007 | – |
| OuterBay | Feb. 2006 | – |
| AppIQ | Sep. 2005 | – |
| Persist Technology | Nov. 2003 | – |
| Compaq | May 2002 | 25.000 |
| StorageApps | Sep. 2001 | 350 |
| Transoft Networks | May 1999 | – |
| NuView | Nov. 1997 | – |
| Convex Computer | Sep. 1995 | 150 |
Coming from the Kashya period after the CDP - Continuous Data Protection - wave and the exit to EMC in 2006, Zerto was the promise to democratize the data protection approach with a global horizontal and universal solution.
To refresh our readers on CDP, the approach addresses the demanding need to strict RPO and RTO for environments which can't tolerate any data divergence or loss of data. In fact, what are the environments accepting that? This is what all users dream about. Being able to protect data whatever the failure, issue or disaster is. At that time, it was a battle of architecture with out-of-band, in-band and even side-band models illustrated by some players some of us have in mind. Surfing on the acronym game, after SAN, NAS, CAS, FAS, CDP was also the birth of TAS for Time Addressable Storage when you can ask your storage system to present the data set at a exact moment of time and restart from there, a bit like a video recorder with an easy navigation method between frames.
If we remember that period more than 15 years ago, CDP was already a hot topic with tons of OEM agreements that anticipated M&A movements as CDP was a must have.
Here are several of them by ascending year:
- Alacritus with Chronospan Continuous Data Protection acquired by NetApp in 2005
- Constant Data with Constant Data CDP module acquired by BakBone in 2005, now Quest
- Lasso Logic with Lasso CDP acquired by SonicWall in 2005
- LiveVault with InControl acquired by Iron Mountain in 2005
- Zetta Systems with ZettaServer IR acquired by Overland Storage in 2005
- Kashya with KBX 500 CDP acquired by EMC in 2006, now Dell
- Revivio with CPS 1200i acquired by Symantec in 2006, now within Veritas again
- Storactive with LiveBackup and LiveServ Exchange acquired by Atempo in 2006
- Topio with Topio Data Protection Suite acquired by NetApp in 2006
- Xosoft with Enterprise Rewinder acquired by CA in 2006, now Broadcom
- TimeSpring with TimeData acquired by Double-Take in 2007, now Carbonite/OpenText
- Mendocino Software with RealTime, RecoveryONE and InfiniView, asset acquired by Xiotech in 2008, now at StorCentric
- Asempra with Business Continuity Server acquired by BakBone in 2009, as said now Quest
- FilesX with Xpress Restore acquired by IBM in 2009
- Mimosa Systems with NearPoint acquired by Iron Mountain in 2010
- Sanrad with Global Disaster Recovery for V-Switch acquired by OCZ in 2012, now Toshiba sorry Kioxia
- InMage with DR-Scout acquired by Microsoft in 2014
- Axxana with Phoenix acquired by Infinidat in 2018
And in addition to solutions from Commvault, Dell, Druva, FalconStor, Hitachi, HPE, IBM, Microsoft, Veeam and Veritas among others.
It is also key to mention the Modern Data Protection wave also called Next Generation Data Protection by some people with cloud, SaaS and cloud-Native approach in mind, and we meet some companies like Clumio, Cohesity, HYCU, Kasten, MayaData, Portworx now Pure Storage, Robin, Rubrik, StorageOS who all address this CDP need with different models and business/IT needs.
Will this HPE move trigger some new moves from competitors, we'll see, but definitely the giant company made a great choice.
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