We hate to say we told you so, but it seems like the outrageous predictions that we at DSA made at the start of the year weren’t so far-fetched after all. It’s official. Nimble Storage, the San Jose, California-based provider of predictive all-flash and hybrid-flash storage solutions, will be acquired by none other than tech giant HPE.
Looking at the details of the acquisition, HPE will pay $1 billion in cash for Nimble’s shares at $12.50 per share, and assume responsibility for paying out Nimble’s unvested equity awards totalling $200 million. The day before, Nimble was capitalised at $731.86m with the shares valued at $8.60, meaning HPE is paying a significant premium for the purchase. But for HPE this is a good move and is cementing a smart strategy to build a compelling digital transformation portfolio based on the new approach to storage. This sits very well with the recent SimpliVity purchase.
But as with the SimpliVity acquisition, HPE has once again proven its mettle as a major disruptive force in the infrastructure market. This deal is sure to have repercussions on Nimble's partnerships with HPE competitors whilst driving HPE’s own sales growth in the all-flash data centre market. Nimble’s offerings, which cater to the entry to midrange segments, are set to complement HPE's scalable midrange to high-end 3PAR solutions and affordable MSA products, allowing HPE to deliver a full range of superior flash storage solutions for customers across every segment. HPE has also bought into Nimble’s industry leading cloud-based management and predictive analytics platform, InfoSight, as well as Nimble Cloud Volumes – a new storage-focused cloud service aimed at providing portability between multiple clouds, to fulfil their vision of making Hybrid IT simple for their customers.
Nimble, meanwhile, has had to face stiff competition in the all-flash array market as well as dwindling external array storage market with the rise of hyper-converged infrastructure appliances and the public cloud. Whilst we like Nimble we always wondered how do they ever become profitable. The sale is not terrible per se, but is it really what investors and the executive team wanted when they launched? The expectations and valuations of the market were in our opinion much higher.
Nimble delivered a revenue of $402.6 million in its most recent fiscal year, up 25 percent year over year and reported a net loss of $158.3m compared to $120.1m in the prior year. Even though the company’s net loss has been slowly shrinking over the past three quarters, they haven’t been able to turn things around fast enough and are now hoping to lean on HPE's global logistics network, brand and existing enterprise relationships to boost business.
We have always felt that the path for these startup flash storage vendors were tough, and as mainstream vendors launched their own credible flash offerings it got tougher. After the collapse of Violin Memory, this really only leaves Pure as the new breed flash vendor now standing alone. The question is whether Pure can make it to profitability. We have never doubted the growth potential but we find it hard to see when these companies will make profit. Pure will continue to go it alone, but for how long?
Full press release follows;
HPE to Acquire Nimble Storage to Strengthen Leadership in Hybrid IT
Hewlett Packard Enterprise (HPE) announced it has entered into a definitive agreement to acquire Nimble Storage, the San Jose, Calif.-based provider of predictive all-flash and hybrid-flash storage solutions. HPE will pay $12.50 per share in cash, representing a net cash purchase price at closing of $1.0 billion. In addition to the purchase price, HPE will assume or pay out Nimble's unvested equity awards, with a value of approximately $200 million at closing.
Flash storage is a fast-growing market and an increasingly important element of today's hybrid IT environment. The overall flash market was estimated to be approximately $15 billion in 2016 and is expected to be nearly $20 billion by 2020, with the all-flash segment growing at a nearly 17 percent compound annual growth rate1.
Nimble's predictive flash offerings for the entry to midrange segments are complementary to HPE's scalable midrange to high-end 3PAR solutions and affordable MSA products. This deal will enable HPE to deliver a full range of superior flash storage solutions for customers across every segment.
In addition, HPE plans to incorporate Nimble's InfoSight Predictive Analytics platform across its storage portfolio, which will enable a stronger, simplified support experience for HPE customers. For example, InfoSight automatically detects 90 percent of all issues within a customer's infrastructure, and resolves over 85 percent of them. This dramatically reduces the amount of time and effort a customer's IT team spends on support activities.
"Nimble Storage's portfolio complements and strengthens our current 3PAR products in the high-growth flash storage market and will help us deliver on our vision of making Hybrid IT simple for our customers," said Meg Whitman, President and CEO, Hewlett Packard Enterprise. "And, this acquisition is exactly aligned with the strategy and capital allocation approach we've laid out. We remain focused on high-growth and higher-margin segments of the market."
Nimble Strengthens and Expands HPE's Flash Storage Portfolio
Nimble was founded in 2007 and has approximately 1,300 employees worldwide. The company delivered revenue of $402 million in its most recent fiscal year, up 25 percent year over year. Nimble's strong application performance in its entry to midrange flash storage solutions is backed by an intelligent, predictive analytics engine that delivers a simplified customer experience. This unique analytics platform goes beyond storage to analyze performance issues across the full data path, from apps to the array, and resolves most issues before they occur. In addition, Nimble has recently introduced multicloud storage services that combine the best of on-premises and public cloud storage capabilities for Hybrid IT deployments.
Key customer benefits of the combined HPE and Nimble portfolio include:
The ability to seamlessly move data and replicate across hybrid flash and all-flash storage to meet unpredictable IT demands
Integrated data protection with application aware snapshots, encryption, replication and integration with leading independent software vendors
Effortless management of storage volumes along with data compaction to reduce capacity costs
Predictive support automation to anticipate and prevent most problems and solve remaining issues in a matter of minutes
Quality of service controls and full stack analytics to ensure predictable performance in hybrid IT deployments
Increased dedicated sales specialist support
A future-proofed technology platform with a rich roadmap to support next-generation storage
"Customers deploying hybrid IT not only need the performance of flash storage but are looking for predictive intelligence to optimize their infrastructure," said Antonio Neri, Executive Vice President and General Manager of the Enterprise Group, Hewlett Packard Enterprise. "With Nimble Storage and 3PAR, we can now deliver on those storage needs and provide more effective on-premises control and performance, at public cloud economics."
Deal Accelerates Nimble Financial Performance
By bringing together complementary product portfolios and leveraging HPE's expansive go-to-market capability, partner ecosystem, and leading server platform, HPE and Nimble will be able to significantly accelerate the financial performance of the combined business.
"Over 10,000 enterprises are using Nimble Storage because our Predictive Cloud Platform is reliably fast, radically simple, and cloud ready," said Suresh Vasudevan, CEO at Nimble Storage. "This acquisition validates our technology leadership in flash and in the use of cloud-based predictive analytics. We're confident that by combining Nimble Storage's technology leadership with HPE's global distribution strength, strong brand, and enterprise relationships, we're creating expansion opportunities for the combined company."
The deal is expected to be accretive to HPE earnings in the first full fiscal year following the close.
Under the terms of the agreement, a subsidiary of HPE will commence a tender offer to purchase any and all of the outstanding shares of Nimble common stock for $12.50 per share in cash. Nimble stockholders representing approximately 21 percent of Nimble's outstanding shares have entered into a Tender and Support Agreement committing them to tender their shares into the tender offer. The completion of the tender offer is subject to customary terms and closing conditions, including Nimble stockholders tendering a majority of Nimble's outstanding shares in the offer, and receipt of specified regulatory approvals.
Following the successful completion of the tender offer, the agreement provides that Nimble will merge with a subsidiary of HPE and become a wholly owned subsidiary of HPE, and all remaining outstanding shares of Nimble will receive in the merger the same consideration paid to other stockholders in the tender offer.
Following the completion of the transaction, Nimble shares will be delisted from the New York Stock Exchange.
The tender offer and merger and closing of the transaction are expected to be completed in April, subject to the satisfaction or waiver of the offer conditions set forth in the agreement.