Investors Look To Next Data-Management Targets After Netezza
September 20 2010 - 2:15PM
Dow Jones News
International Business Machine Machines Corp.'s (IBM) bid for
Netezza Corp. (NZ) again shined the spotlight on the data-storage
and warehousing sectors, with more deals anticipated.
Demand for data storage is expected to continue to grow as
virtualization and cloud computing become more widespread and
people generate more information. But the number of companies who
provide the needed storage--as well as ability to manage the
documents--is limited, and their stock prices have soared in recent
weeks.
The storage companies getting the most investor focus over the
past month include Compellent Technologies Inc. (CML), CommVault
Systems Inc. (CVLT) and Isilon Systems Inc. (ISLN). Teradata Corp.
(TDC), one of Netezza's competitors in data warehousing, saw its
shares get the biggest boost Monday.
Teradata and Isilon declined to comment, while representatives
from Compellent and CommVault didn't respond to requests for
comment.
IBM's $1.7 billion bid for Netezza, which provides technology
that allows companies and government agencies to quickly analyze
huge amounts of data, marks the second large takeover bid in the
storage space in a month. Hewlett-Packard Co. (HPQ) recently
defeated Dell Inc. (DELL) in a public bidding war for data-storage
company 3Par Inc. (PAR), vying to get access to the high-end
storage market.
The recent M&A in the sector highlights the need for tech
giants to expand in the fast-growing field of data storage and
management. The market has been growing quickly as companies and
governments use more space to hold the billions of emails, customer
orders and other vital information needed to run their
operations.
"Many larger companies are not innovators, and they're looking
for growth right now," ThinkEquity analyst Rajesh Ghai said, adding
that the number of potential targets is dwindling. "But I don't
think every storage company will get acquired."
Forrester Research analyst Jim Kobielus said Teradata has an
"extensive" set of partnerships and its technology is widely
adopted by Fortune 500 companies. He said H-P might be interested
in buying the company to boost its data-warehousing offerings,
though H-P has made pricey acquisitions in the past month.
Other potential acquirers include data-storage companies EMC
Corp. (EMC), as well as big technology companies like Oracle Corp.
(ORCL), Cisco Systems Inc. (CSCO) and Dell.
Shares of Compellent and CommVault have soared about 50% since
Dell's initial offer for 3Par, while Isilon has jumped nearly 60%.
Netezza shares had shot up 77% before IBM's offer Monday.
Compellent recently was up 1.7% to $18.15, CommVault was 3.7%
higher at $28.01 and Isilon increased 1.2% to $25.37.
Teradata, meanwhile, had climbed only 16% before IBM's offer for
Netezza. Its shares got the biggest boost from the news Monday,
recently up 8% to $37.21.
Noble Financial analyst Gary Spivak said acquisition speculation
has been built into many of the valuations and the stocks likely
don't have much higher to go.
"I think they're pretty close to the ninth inning of their
takeover speculation valuation," Spivak said, adding that there
aren't many bargains left.
Meanwhile, Steve Gerbel, head of merger arbitrage hedge fund
Chicago Capital Management, said it's hard to determine fair value
for the recent spate of acquisitions in the tech sector.
"We're getting these transactions that are impossible to value
using historic methods because of the growth that's there," Gerbel
said. "There has been a dearth of mergers for so long, there really
weren't comps people could go and easily pick out."
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
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