), the third largest player globally in the external disk storage
market, recently announced that it would acquire Akorri Networks, a
virtualization software company in an "all cash" deal though the
amount was not disclosed. NetApp creates innovative
storage and data management solutions for small and medium-sized
companies around the world. It competes mainly with EMC (
), IBM (
), HP (
) and Dell (
) in the external disk storage systems market.
The announcement sent NetApp's stock higher and is generally
perceived as a terrific deal for NetApp. It will position NetApp to
better compete with EMC, IBM and HP.Below we quantify the impact of
Akorri acquisition on our
$64.48 Trefis price estimate for NetApp's stock
, which is about 10% above market prize.
Importance of Virtualized Infrastructure and Increasing
Over the past few months, we have discussed the increasing
adoption of cloud and virtualized infrastructures by organizations
around the world and how major storage players like IBM and HP are
extending capabilities to cater to this demand. (See
IBM's Middleware Dominance Will Help it Serve the
IT Upgrades, Cloud Computing Boom Boost EMC
Given the high adoption of virtualized environments as well as
increased competition among the service providers, it has become
important for competing firms to acquire additional tools and
capabilities for management of an extended virtualized environment.
Additionally, the fact that the storage vendors could tie their
storage offerings into their integrated virtualized infrastructure
offerings further amplifies the strategic importance of virtualized
infrastructure and acquisitions made in the segment for existing
players. (See HP Emerges as Victor over Dell in Battle
Akorri Acquisition Expands NetApp's Offering
One of the core propositions of virtualized infrastructure is
scalable availability of IT resources to different operations
running in the organization which can be metered and billed
accordingly. The ability to accurately predict and manage
performance and capacity requirements has been a common obstacle
for many customers wanting to transition to a virtualized
environment. Akorri acquisitions extends NetApps ability
to provide customers with comprehensive tools to automate and
analyze their shared IT infrastructures, efficiently deliver on
service levels, and respond to rapidly changing business needs.
Akorri also further strengthens NetApp's data management
capabilities to achieve greater quality of service and performance
in their virtual and cloud environments. With these enhanced
capabilities, customers can accelerate their transition to a shared
What it Means for NetApp's Storage Share
We believe the acquisition will help NetApp as bulk of the
storage demand is expected to arise from shift to virtualized
infrastructure in the future. (See How NetApp Benefits from
Cloud Demand) With best-in-class management solutions for its
virtualized storage environment offerings, NetApp stands to gain
share in the storage market.
We estimate there could be an upside of 20% to our $64.48 Trefis
price estimate for NetApp's stock if its share in the storage
market increases to 16% by the end of our forecast period as
against our current estimate of 13%.
Drag the trend line in the chart above to see the impact of
various storage share scenarios on NetApp's stock value.
complete analysis of NetApp's stock is here
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