2005 Top Ten: M&A

Storage mergers and acquistions came at a fast and furious pace in 2005.

With the industry still buzzing from the previous December's Symantec-Veritas deal, McData set the tone for 2005 with a $235 million acquisition of switch rival CNT Networks in mid-January. Further industry consolidation came in the form of billion-dollar deals: Sun picked up StorageTek in June, and Seagate gobbled its hard disk rival Maxtor in December.

But most of 2005's deals weren't about consolidation. There were a lot more cases of established storage companies picking up startups that provide them with technologies they perceive as hot but never got around to developing themselves.

Here's the largest acquisitions of 2005:

No. 10: Cisco Chomps FineGroundCisco dropped $78 million on WAN optimization startup FineGround, barely a year after picking up similar technology in an $82 million acquisition of Actona. Either Cisco's unhappy with Actona, or it makes so many acquisitions that somebody forgot it already had a WAFS product. We think it's the former.

No. 9: EMC to Buy Rainfinity

EMC has had mixed results with virtualization products. Its 2003 acquisition of server virtualization startup VMware has been a raging success, while its internally developed Invista block storage virtualization device has barely made it out of the gate. For $90 million, it picked up file virtualization from startup Rainfinity. For now, EMC will maintain Rainfinity as a separate business, as it has done with VMware. It could benefit from integrating Rainfinity technology into its NAS products, but that type of integration is harder than it seems -- something NetApp discovered after acquiring Spinnaker.

No. 8: QLogic Gives Up Controllers

Unlike other deals on the list, the target of this one was a business unit rather than an entire company. By selling off its chip controller business for $225 million, QLogic signaled its intention to focus on HBAs and switches. QLogic has since invested a piece of the money it took from Marvell on switching technology, buying startup Troika for $36 million, and might look for more in 2006. (See QLogic Picks Up Troika.)No. 7: McData Bags CNT for $235M

While many Wall Street and technology analysts were expecting McData and Brocade to get together in 2005, McData instead bought out its smaller struggling rival CNT for $235 million. For McData, the deal removed a competing director for its flagship i10K product, and provided new services business, sales channels, and engineering talent. Casualties included CNT's UltraNet Multi-service Director (UMD), a strong early seller that McData dropped to make way for the i10K, and more than 500 jobs lost from the combined companies. (See RIP: CNT UMD.)

No. 6: HP Chomps AppIQ & Peregrine

HP had a busy year on the OEM front, but only bought out one of its storage partners -- SRM startup AppIQ for an undisclosed price, which insiders say was upwards of $250 million. AppIQ's embracing of open standards and its own OEM deals with Hitachi Data Systems, Sun, and Engenio as well as HP made it an attractive candidate. IBM immediately tried to throw cold water on the deal's impact with its Aperi open source storage management initiative. (See Aperi Appears Amid Questions.) You can expect a response from EMC in 2006, perhaps through its own SRM acquisition.

No. 5: Cisco Takes On TopspinThis $250 million acquisition wasn't the most expensive of the year, but could be the most significant in the long run. The deal rescued InfiniBand from the storage scrap heap, and Cisco intends to turn the high-speed interconnect technology into a main data center play. Cisco now has Ethernet, Fibre Channel, and InfiniBand switching covered, and also has big plans for the server virtualization software Topspin developed. (See Cisco Topspins Into Virtualization.)

No. 4: NetApp Buys Decru

By paying $272 million for a startup with less than $10 million in quarterly revenue, NetApp showed how important it considers hardware-based encryptio's role in data security. NetApp hasn't yet seen the uptick in sales it expects from Decru, but it's inevitable that encryption's popularity will soar. What's less certain is whether dedicated encryption boxes such as Decru's will be the method of choice.

No. 3: EMC Captures Captiva

EMC's $275 million acquisition of input management startup Captiva Software wasn't a pure-play storage deal, but it didn't exactly take EMC into unchartered territory. EMC started down the document management path with Documentum in 2003, and subsequent acquisitions of VMware and Smarts were also non-storage plays. EMC sees Captiva as a complement to Documentum and a piece of its ILM strategy.No. 2: Seagate Munches Maxtor

This $1.9 billion tickled Wall Street but was a snorer from a technology standpoint. The hard disk vendors' products mostly overlap, and Maxtor gives Seagate nothing in enterprise storage that it didn't already have, except a larger footprint in the disk-drive market. Big price tag just to wear bigger shoes.

No. 1: Sun to Acquire StorageTek for $4.1B

The big storage deal of 2005 moves a company successful at selling tape libraries under the banner of one struggling mightily with storage. Can Sun save its storage business with this $4.1 billion investment? Like most large deals, it will take a while to determine if the money was well spent. StorageTek's tape business generates lots of cash, but it's not like StorageTek has had much success selling disk. And even the folks at Sun must have heard by now that disk is the future of storage. The StorageTek brand lives on, as Sun will use it for all of its storage products. (See Sun Sets on StorageTek.)

Among the acquisitions that didn't make the cut for our Top 10: