Red Hat Acquires Nexus Ventures-backed Gluster For $136M

Open source solutions firm Red Hat Inc. has acquired Nexus Ventures-backed Gluster Inc., a provider of scale-out, open source storage solutions, for approximately $136 million in cash.

As part of the transaction, Red Hat will also assume unvested Gluster equity outstanding on the closing date and issue certain equity-retention incentives. The transaction is expected to close this month, subject to customary closing conditions.

Gluster was founded in 2005 by Hitesh Chellani and Anand Babu Periasamy. In late 2008, Gluster raised $4 million in the series A funding round, led by Nexus Venture Partners. Last November, it received $8.5 million in a series B funding round, led by Index Ventures, in which Nexus Venture Partners also participated.

"The explosion of big data and the new paradigm of cloud computing are converging, forcing IT to re-think storage investments that are cost-effective, manageable and scale for the future," said Brian Stevens, CTO and vice president, Worldwide Engineering at Red Hat.

"Our customers are looking for software-based storage solutions that manage their file-based data on-premise, in the cloud and bridging between the two. With unstructured data growth (such as log files, virtual machines, email, audio, video and documents), the 90's paradigm of forcing everything into expensive, single-system DBMS residing on an internal corporate SAN has become unwieldy and impractical," he added.

The heart of Gluster is GlusterFS, a software-only, scale-out storage system. It allows enterprises to combine large numbers of commodity storage and compute resources into a high-performance, centrally-managed and globally-accessible storage pool. By combining commodity economics with a scale-out approach, customers can deploy abundant storage without compromising on cost, performance and manageability.

AB Periasamy, co-founder and CTO of Gluster said, "We believe this is a perfect combination of technologies, strategies and cultures and is a great development for our customers, employees, investors and community. Gluster started off with a goal to be the Red Hat of storage. Now, we are the storage of Red Hat."

"Enterprises and service providers have struggled to manage their rapidly expanding unstructured data stores with conventional storage systems," said Henry Baltazar, senior analyst of The 451 Group. "The scale out storage technology and expertise Red Hat is gaining from the acquisition of Gluster will serve as a powerful foundation for future public, private and hybrid storage clouds."

The acquisition is not expected to have any material impact to Red Hat's revenue this fiscal year but should begin to grow next year based on a subscription revenue model.

"Industry analysts estimate the total addressable market for unstructured data storage at approximately $4 billion and growing. This is an exciting new area of potential growth for Red Hat and one in which we intend to invest aggressively," said Charlie Peters, EVP and CFO of Red Hat.

"While we expect Red Hat's operating income to continue to grow nicely next year based on revenue growth, we expect that non-GAAP operating margin for fiscal year 2013 could be approximately 150 basis points lower than fiscal 2012 as we make additional investments to help realize Gluster's potential. At that level, Red Hat's operating margin will still be among the highest compared to other high-growth software companies when they were at the $1 billion revenue stage," he added.

Early this year, Citrix Systems acquired another Nexus Ventures backed firm Cloud.com, that is into software infrastructure platforms for cloud providers in a deal worth more than $200 million. Cloud.com was funded by Redpoint Ventures, Nexus Capital and Index Ventures.

See Our Earlier Reports:

Gluster Raises $8.5M In Series-B Funding From Index, Nexus Citrix Acquires Nexus Ventures-Backed Cloud.com For $200-250M