No sooner had IBM announced its intention to acquire Netezza this morning than the New York Times came knocking for some perspective on the deal. There were two main questions: will anyone else bid for Netezza, and will someone now bid for Teradata.
While there is no guarantee of a 3Par-style bidding war I believe Netezza has the potential. Just last week we stated that Netezza would be the prime candidate for any firm looking to make an impact in the data-warehousing sector. In a crowded market it offers the right mix of established presence, technological differentiation and growth potential.
According to the 451 Group’s recent Information Management report, Data Warehousing: 2009-2013, Netezza is the fifth-placed data warehousing vendor, albeit some distance behind the established players. The company is predicted to deliver full-year revenue of just under $250m in 2010, in the region of 10% of the data-warehousing revenue of Oracle and IBM, but easily double the revenue of the sixth-placed vendor.
We also think rivals may see some potential to beat IBM’s offer price. As my 451 colleague Brenon Daly notes, the $27 per share purchase price represents an 80% premium against where Netezza was trading a month ago, but just 10% on the previous day’s close. Additionally, IBM is paying 6.8x projected sales which, while a relatively rich valuation, is much lower than rival EMC paid for Greenplum.
One of the reasons we think Netezza could spark a bidding war is that it is differentiated by its growth potential and established market share. It may not be in 3Par territory in terms of the scarcity of comparable rivals (we are tracking 20+ data warehousing providers), but if the likes of HP and Dell are looking to make a significant impact in data warehousing, Netezza is the prime candidate.
The other option would be to make a bid for Teradata, which delivers in market share what it lacks in growth. The company is the the largest data warehousing specialist by a considerable margin and has repositioned its product set to improve growth, so it is no surprise to see speculation that it could be the next acquisition target.
Given Teradata’s $6.2bn market cap, potential acquirers may consider there is more value in trying to outbid IBM. Either way, IBM’s bid for Netezza may not be the last bid to acquire a data warehousing player we will see this year.
One other thing – Netezza is being advised on this deal by Qatalyst Partners. No prizes for guessing who advised 3Par. Qatalyst’s other notable advisory role? The six-week bidding war that resulted in EMC acquiring Data Domain.