EMC Acquires Data Warehouse Vendor Greenplum; Creates New "Data Computing" Product Division

See EMC’s press release on the deal here.  First, some takeaways from the press release and related coverage:

  • All cash transaction, valuation undisclosed.  See below for some fun and math, trying to guestimate it from standard ratios.
  • Greenplum had raised $61M in venture capital.
  • EMC intends to create a new “data computing” product division and to have Greenplum CEO Bill Cook run it, reporting to Pat Gelsinger.
  • This the second of the specialty data warehouse DBMS vendors to get acquired.   Microsoft acquired Datallegro in 2008 at a rumored valuation of $250M.
  • Greenplum was ranked a visionary in Gartner’s Data Warehouse DBMS magic quadrant in January.  They were positioned about 70% on vision and about 49% on execution.   The leaders were Teradata, Oracle, IBM, Netezza, Microsoft, and Sybase.
  • Greenplum’s CEO and two co-founders have posted an open letter to customers and partners which argues that EMC is “uniquely positioned to dramatically accelerate the Greenplum vision of building the enterprise data system of the future.”
  • In addition to their DBMS, Greenplum offered an “enterprise data cloud platform” called Chorus, which includes something called the Greenplum Data Hypervisor.
  • This Wall Street Journal article quotes EMC talking about “great synergies” between Greenplum and VMware which to me are non-obvious.  Perhaps they’re related to the prior point.
  • EMC will continue to offer Greenplum’s full product portfolio to customers
  • Note this, buried at the end of the press release:  EMC plans to deliver new EMC Proven reference architectures as well as an integrated hardware and software offering designed to improve performance and drive down implementation costs.  Pretty clearly, this says a data warehouse machine/appliance is coming.

So what does all this mean?

  • That storage vendors are going to continue to move up the food chain.  EMC has done a slew of acquisitions — Greenplum looks to be its 53rd — and I expect that to continue.  Storage itself is changing as it continues to include more networking and memory technology.  But storage vendors are changing too, not content to get stuck in the commoditization trap.
  • That yet another type of vendor is now attacking the database market.  In addition to (1) a slew of startups focused on specific niches, we now have (2) SAP via its acquisition of Sybase, and (3) now EMC via Greenplum attacking different segments of the ~$15B/year database market.  The big three oligopoly should not sleep too soundly at night.
  • With my Aster Data board hat on, I’d say that EMC is only getting part of the picture.  Basic data warehousing on big data is only part of the equation.  What customers ultimately want to do with big data is analyze it, and that requires the high-performance execution of complex analytics on big data — something that Aster Data does uniquely well.  Most of the data warehouse DBMS market is focused simply on reducing the price/performance for basic data warehousing.  To my knowledge, only Aster Data is focused on that plus enabling complex, high-end analytics.

Here’s my estimate on the valuation range.  This is based on math, guesswork, intuition, and standard ratios.

  • LinkedIn says Greenplum has about 130-140 people.
  • Enterprise software company revenue often runs about $250K to $350K/employee.
  • This implies revenues of $30M to $50M.
  • Software companies typically sell for 1-2x revenues when they’re in trouble, 2-3x revenues when they’re plodding along, and 8-10x revenues when things are hot.
  • Netezza, for example, currently trades at 4x revenues.  (But remember, that’s to buy one share.  If you want to buy them all, you’ll have to pay a premium.)
  • Greenplum, to my knowledge was doing pretty well.  Let’s take 5-8x as my guess on the revenue multiple.
  • This implies a valuation range of $150M to $400M.
  • It’s hard to imagine that their last funding of $27M in January 2008 was done at anything less than $100M post-money, and possibly a fair bit more.
  • This, in turn, implies that no VC would want a 1x return over 2+ years for a company that was doing well.  If true, this wipes out the low end of the valuation range.
  • This leaves me estimating the valuation at somewhere between $300M to $400M.

Bear in mind that it doesn’t take much to swing these numbers because they are built by multiplying estimates and ranges.  A few changes here or there and I can $200M.  Or I can get $500M.  My real hope is that I have enough offsetting errors that I end up close to the right answer!  If I get new information that either changes my estimates or simply provides the facts, then I will try to update this post and share it.

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12 responses to “EMC Acquires Data Warehouse Vendor Greenplum; Creates New "Data Computing" Product Division

  1. Good summary Dave, but you forget to mention your old buddy Ronaldo Ama, who left SAP/BusinessObjects/Acta to run Greenplum engineering.

    Congratulations Ronaldo!

  2. “What customers ultimately want to do with big data is analyze it, and that requires the high-performance execution of complex analytics on big data” — where does that leave private players like SenSage, LogLogic that store and analyze the biggest source of corporate data these days, logs? What kind of values would these companies fetch?

  3. Pingback: EMC is buying Greenplum | DBMS2 -- DataBase Management System Services

  4. Indeed Darren, thanks for the reminder — congrats Ronaldo!

  5. Quick comment for those who read this post twice — I did some revisions on the math (as well as the body copy) and didn’t mark the post as revised in any obvious way. (And from where I am right now I can’t easily do that. Hence this comment.)

    In the earlier draft I’d come up with a valuation range of $150M to $250M, but later raised it by changing some of my assumptions.

    One of the reasons I show you how I arrive at my numbers is so you can plug in your own. Think the multiple was lower? Plug it in. Think I’m guessing high on revenue (which I think I might be), then plug in a lower number.

    As any good mathematician, 90% of the fun is how you solve the problem, not whether you get the right answer.

    (Though I like doing that to, when I can — I almost nailed the BOBJ/Inxight price which was later disclosed.)

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  7. Dave,

    Interesting overview. The synergy with VMWare is around Greenplum’s work to abstract the storage layer aware from the DBMS a little bit so that data can shuffled around and processed wherever there is spare capacity (in theory).

    However, “Most of the data warehouse DBMS market is focused simply on reducing the price/performance for basic data warehousing. To my knowledge, only Aster Data is focused on that plus enabling complex, high-end analytics” seems way off to me. I’m sure you’re familiar with Netezza.

    Joe

  8. Thanks, guys – we’re all really psyched about the opportunity ahead of us!

    Cheers!

    -Ronaldo

  9. Your blog is nice.

  10. GP was losing piles of money, VC’s wanted out. Scott tried to sell them to Oracle and got blown off by John Fowler who thought they competed against his ZFS products. EMC bottomfed, got them at a discount to last round VC’s.

  11. Pingback: EMC buys Greenplum: Right answer, wrong question | Kalido Conversations

  12. Pingback: Leo’s Pawn to King Four: HP To Acquire Vertica | Kellblog

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