Red Hat Pays 136 Million To Enter Cloud Storage Space. Why?

Seems like a hefty price but the payoff could be worth it

As my Network World editor Julie Bort covered earlier this week, Red Hat made their first (and being it is October, maybe their only) acquisition of the year this week by buying Silicon Valley based, scale out storage vendor Gluster.  Gluster develops the GlusterFS file system  and the Gluster open source project.

Red Hat paid a whopping 136 million in cold, hard cash for Gluster. This represents quite a return to the investors in the company who invested a total of about 12 million dollars into Gluster.  It is that kind of return that keeps VCs chasing the next big deal. 

So why would Red Hat pay such a premium? Well remember it is not just how much money was raised. Gluster claims more than 100 enterprise customers using their software and a thriving community of support.  But I would guess looking at their revenue, the 136 million is still a good multiple. Congratulations to the Gluster team for a great liquidity event. It sounds like Red Hat has bought their way into the cloud storage market.

Last night I had a chance to speak with Ranga Rangachari - General Manager, Storage at RedHat and Ben Golub, President and CEO of Gluster.  Both men were still ecstatic over the deal.  I asked Ranga if GlusterFS interoperability with Hadoop means that we will see Red Hat playing a bigger role in the Hadoop ecosystem.  Rangachari said Red Hat is very excited to be a good member of the community and will be expanding Gluster’s/Red Hat’s presence.  Rangachari though was equally as excited about the prospect of cloud storage in general though.  This is a very big market which Red Hat wants to have a bigger presence in.

Ben Golub was excited because all of the Gluster employees are moving to Red Hat and will have a chance to really continue their plans in a much bigger sandbox.  Also Golub was very happy for the Gluster community. He said since the deal was announced they had more hits to the community website in the few days than they usually get in a month.  Golub does not expect that to change now either.

Red Hat’s commitment to open source and supporting communities is unquestioned, so Golub has good reason to believe that.  Ranga also reaffirmed the commitment to the Gluster community.

So how does Red Hat recoup that 136 million and turn a profit? Well as I said the cloud storage market is big and growing bigger every day.  But also according to Golub and Rangachari, look for a “special relationship” between Gluster’s storage and Red Hat’s OS and applications.  While the Gluster technology will be standards based and open,  there are lots of plans for some really great interoperability.  Both guys said look for new product announcements around this soon.

So Red Hat is in the cloud storage business to stay. They have paid a 136 million dollar entrance fee but also bought some great technology and its open source which they have proven they know how to commercially capitalize on.  I think they will not regret spending the 136 million.

Authors Note: I wrote this yesterday afternoon. Before I had a chance to publish it, word of Steve Jobs death came over the wire.  It put me in such a funk that I just didn’t bother putting it up until this morning. Even now I pondered just doing a Steve Jobs post instead.  I decided not to, but my thoughts and prayers to his loved ones and to those who loved him.  Too young, too bright to leave so soon.

• Data Center
• Software
• Mergers / Acquisitions