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Nexsan has a great business model with its channel-only focus, Consiliant's Kadlec said. "It has been a very good partner," he said. "If Imation lets Nexsan run as a wholly-owned subsidiary, it will work well for us."
For Nexsan, a privately-held company with annual revenue of just over $80 million that has been profitable for many years on an EBITDA (earnings before interest, taxes, depreciation, and amortization) basis, a primary reason to be acquired by Imation is to gain critical mass, Nexsan's Black said.
"In the long run, storage companies need to be billion-dollar companies," he said. "Nexsan had been doing really well, but we were a small company."
Nexsan's acquisition by Imation is the latest in a long-running consolidation of second-tier storage vendors.
Black said that the consolidation in the industry is being pushed by a need for larger companies to acquire the kind of storage technology that they are not developing.
"The big guys -- HP, IBM, Dell -- are unable to create their own storage technology," he said. "EMC since it developed Symmetrix has not been able to generate its own technology. Small companies generate the IP [intellectual property] needed by the big guys. So the consolidation is not because the small guys can't succeed on their own."
When Imation looked at potential acquisition targets, it found a lot of smaller companies that were heavily weighted towards primary storage, which is not a focus of Imation, Imation's Williams said. "The Imation strategy has been more in terms of backup and archive storage," he said. "But primary storage is a core part of what Nexsan brings to the table."
Black said that, over the long term, it is hard to be in the storage business without primary storage. "It's very important to have a disk-based offering to succeed," he said. "Nexsan really didn't focus on primary storage until the last three years, but going forward, primary and secondary storage will merge."
Imation's acquisition of Nexsan has its detractors.
Karl Chen, chief marketing officer at Starboard Storage Systems, a Broomfield, Colo.-based developer of hybrid disk and flash storage system, wrote in a statement emailed to CRN that the deal values Nexsan, which pulled out of a potential IPO a few years ago, at only 1.5-times 2011 revenue.
While most of Nexsan's 11,000 installations are JBOD (just a bunch of disks) arrays, the IP for its new NTS5000 unified storage systems is based on the ZFS file system, which is controlled by Oracle, Chen wrote.
"Imation has been mostly an archive tape cartridge provider trying to move into storage systems with their acquisition of the ProStor RDX [InfiniVault] product more than a year ago," he wrote.