EMC in talks to buy ScaleIO for $250m

Enterprise storage network developer ScaleIO was founded in 2010 and has raised just $12 million to date.

Enterprise storage network developer Scalio Inc. is in talks to be acquired by EMC Corporation (NYSE: EMC) or its subsidiary VMware Inc. (Nasdaq: VMW) although there may also be competition from several rival computer giants. The amount of any acquisition is believed to be between $200 and $250 million.

This is a relatively high amount for a company that was founded in 2010 and has only 20 employees at its Palo Alto headquarters and Israel development center, and has annual sales of less than $1 million.

ScaelIO was founded in 2010 by CEO Boaz Palgi, CTO Erez Webman, Lior Bahat, Eran Borovik, and Erez Ungar set up the company, after long careers in enterprise storage, especially at Topio, which was acquired by NetApp Inc. (Nasdaq: NTAP) in 2006. They were also involved in XtremIO which was acquired by EMC for $430 million last year and Storwize which was acquired by IBM in 2010.

ScaleIO's product seeks to streamline storage technology for large enterprises with high information systems performance requirements using smart software that replaces existing hardware. The company says that it is trying to cut the cost of these systems by 80% through virtual management of enterprise storage systems.

ScaleIO has raised $12 million to date from Norwest Venture Partners (NVP), Greylock Partners and private investors including Check Point Software Technologies Ltd. (Nasdaq: CHKP) president Amnon Bar-Lev and Frank Slootman the former CEO of Data Domain, which was acquired by EMC in 2009. EMC, sources inform "Globes," was itself a seed investor in ScaleIO.

ScaleIO began a financing round several months ago at a company value of $100-150 million and was among other things looking to find a strategic investor. ScaleIO's company value is rising sharply bearing in mind its finding raising round in December was at a company value of just $30-40 million. During the latest fundraising round, ScaleIO attracted the attention of computer giants like IBM, NetApp, and Dell that all probably examined the possibility of an acquisition.

EMC seeing the major interest in the storage start up also entered the fray and entered talks as the price spiraled to over $200 million. It is not yet clear if the acquisition will go through. Last week VMware CEO Pat Gelsinger was in Israel and it is possible that he pushed the talks forward.

EMC's previous investments in storage in Israel have paid off. The company invested in Anobit which was acquired by Apple last year for $390 million, Varonis Systems, which is considered one of Israel's most promising storage companies, and as previously mentioned EMC acquired XtremIO for $430 million.

Published by Globes [online], Israel business news - www.globes-online.com - on June 20, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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