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HPE is acquiring disaster recovery and data protection company Zerto in a $374 million all cash purchase. HPE says the transaction is expected to contribute more than $130 million in run-rate revenue at software gross margins.
The transaction values Zerto at just over 2 times the $183 million in funding raised by the company, according to Crunchbase. This represents a fairly modest return to investors in Zerto, given the risk taken since the company was founded in 2009.
Zerto will be placed into the HPE Storage business unit, reporting to Tom Black, Senior Vice President and General Manager. HPE is touting the purchase as an extension of its HPE Greenlake edge-to-cloud strategy, and its “shift to a cloud-native, software-defined data services business”, according to the press release announcing the purchase.
“Coupling Zerto’s industry-leading cloud data management and protection software platform with HPE’s cloud data services and go-to-market reach will offer an unparalleled experience for our collective customers and partners,” said Ziv Kedem, CEO of Zerto in a statement.
For a few years now, Zerto has been shifting from its original role as a provider of near-zero data loss replication for DR of VMware environments. It has attracted a loyal enterprise customer-base who needed the reliability and ease-of-use Zerto provided. Its orchestration and automation of disaster-recovery processes was especially well-regarded.
Zerto was trusted with helping customers to keep their mission-critical workloads online after a disaster, and it sought to expand from that position into a more general data protection role. Using its core technology of journal-based continuous data protection, Zerto added data recovery functions found in more traditional backup and recovery products, but with far more granular recovery capabilities.
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Zerto also expanded its capabilities to support cloud workloads and Kubernetes, and was a useful bridge between traditional system architectures and cloud approaches. At Cloud Field Day 11 last week, Zerto highlighted that there are a great many enterprises that aren’t ready to change their existing processes too much, but still want to make use of cloud infrastructure. Zerto has been adding features to support them, and there’s clear value to HPE here in using Zerto as a way to get top-end enterprise workloads, and the associated revenues, onto its cloud offerings.
My view is that this is an excellent purchase for HPE, though a somewhat disappointing return for Zerto’s investors. With HPE’s backing, Zerto can perhaps now fully realize the company’s early promise and expand out of its original niche. There is no shortage of opportunity, given the prevalence of ransomware and the redrawing of the boundaries of the traditional data protection market.