2003 Top Ten: Mergers & Acquisitions

As 2003 draws to a close, it's time to look back, eggnog in hand, and check out the consolidation that's increasingly taking place in the storage networking market.

At the center of it all is EMC Corp. (NYSE: EMC), which gave everybody around 4 billion reasons to think of it as a software company this year. This hungry outfit put up roughly $3.65 billion to buy three companies in the second half of 2003 in an attempt to drive its software sales to 30 percent of its total. We dont know yet if the strategy will work, but it did give EMC the top three spots in the Byte and Switch list of the Top 10 Acquisitions of 2003. (And that’s what really matters, right?)

Other storage players had money to spend as well. EMC's software rival, Veritas Software Corp., and switch-maker McData Corp. (Nasdaq: MCDTA) made two significant acquisitions apiece in a year when established companies liked to play "Scoop Up the Startup."

All this activity made it a great accomplishment to crack our Top 10. Here it is, in what we think is order of significance:

No. 1 EMC Cops DocumentumIn the middle and most expensive of its three 2003 acquisitions, EMC paid around $1.7 billion in a stock swap for content management software company Documentum Inc. The deal moves EMC further up the "information lifecycle management" stack. EMC is operating Documentum as a software division.

No. 2 EMC Gobbles Legato

This $1.3 billion July stock deal for the backup and recovery software vendor kicked off EMC’s second-half shopping spree and painted a bullseye on backup software market leader Veritas. EMC runs Legato Systems Inc. (Nasdaq: LGTO) as a software division, expanding its customer base by more than 30,000.

No. 3 EMC Gobbles VMware

At $635 million in cash, VMware was the cheapest and most surprising of the EMC deals. VMware’s virtualization software is a bit of a departure for EMC’s strategy, but EMC sees it as complementary. Like its other two acquisitions, EMC will keep VMware intact and allow it to remain a business partner with EMC’s major rivals (see Storage Makes Strange Bedfellows).No. 4 Veritas Picks Up Precise

Was this really a 2003 acquisition? It seems like it happened so long ago. That’s because it took more than two years for Veritas to close the $609 million deal to purchase Precise Software. Now Veritas may live to regret it, after admittedly disappointing sales of the application performance management company's product last quarter.

No. 5 Emulex Drops Cash for Vixel

Emulex Corp. (NYSE: ELX) paid $310 million in cash in hopes that Vixel Corp.'s embedded Fibre Channel switches would complement its host bus adapters (HBAs). Vixel had been losing about $2.5 million per quarter, but its revenues were growing impressively and it had a strong roster of OEMs.

No. 6 NetApp Annexes Spinnaker For around $300 million in stock, Network Appliance Inc. (Nasdaq: NTAP) picked up its rival’s technology and engineering expertise. Spinnaker Networks Inc. gave NetApp an advanced distributed file system architecture and cluster performance scaling to overcome the limitations of its Data OnTap OS. The Spinnaker distributed NAS technology will form the platform for a new breed of NetApp systems that can provide clustered file services for thousands of terabytes (see NetApp Maps NAS Path).

No. 7 CNT Walks Off With Inrange

CNT (Nasdaq: CMNT) paid $190 million in cash to complete this merger of two high-end storage networking players in May. The deal allowed CNT to add Inrange Technologies' Fibre Channel directors to its portfolio of SAN extension products and services. So far, so good -- CNT fully integrated Inrange in 53 days and posted a profit in the second quarter after the merger.

No. 8 McData Completes Sanera Acquisition

At $102 million, Sanera Systems Inc. was the more expensive half of McData’s one/two software punch in late August (see McCrafty). McData's acquisition of Sanera -- which had been rumored to be in the works for several months -- gives it a highly scaleable director-class SAN switch that goes well beyond the 140-port switch it previously offered.No. 9 McData Sweeps Up Nishan, Sanera

Nishan Systems Inc. makes a lower-end switch than Sanera and cost McData $85 million, but we like this deal better because it spurred a nasty lawsuit (see Nishan Founder: VCs Screwed Me). Nishan co-founder Aamer Latif claims two of Nishan's venture capital backers, two Nishan executives, and McData cheated him and other of the startup's common stockholders out of their fair share of the proceeds from the deal. Despite the legal bills, the deal will probably be worth it for McData in the long run because the company has high hopes for the Eclipse 1620 that supports iSCSI and iFCP.

No. 10 Veritas Moves up the Stack

As it did with Precise, Veritas announced this deal first, then took a long time to close it. Veritas struck the $62 million deal with Jareva Technologies last December, but it closed in 2003. The acquisition broadens Veritas’s software portfolio, adding automated server provisioning to its storage management arsenal.

And there you have it. Not all this year's acquisitions made it into our Top Ten, though. Following is a snapshot of the also-rans from 2003:

— Dave Raffo, Senior Editor, Byte and Switch