In order to expand its cloud-based storage services, EMC Inc. (EMC) has acquired Syncplicity, a privately-held SaaS provider. Though the financial details of the deal were not disclosed, it was stated that the acquired company would be integrated with EMC’s Information Intelligence Group.
Based in California, Syncplicity offers cloud-based file management and storage systems that let users access and synchronize files and use applications through multiple devices without undermining the security needs of the enterprises.
The company has 30,000 business customers, ranging from small businesses to large enterprises, and it also has partnerships with bellwethers like Google Inc. (GOOG), salesforce.com inc. (CRM) and Amazon.com Inc. (AMZN). Companies of different domains starting from consulting, legal, financial services, technology and manufacturing sectors use services provided by Syncplicity.
With the acquisition of Syncpliclity, EMC will be able to compete with Dropbox and SugarSync in the cloud-based sync and sharing domain. Incidentally, according to IDC, Dropbox has more mindshare than Syncplicity in the file synchronization segment.
But EMC’s leading cloud-based storage capabilities when combined with Syncplicity’s software solutions should create the necessary synergy to tilt the scales in its favor. We think that the acquisition will thus expand EMC’s customer base and market share, due to the higher demand from enterprises going forward.
EMC’s aggressive acquisition strategy has proved beneficial in the past, being largely responsible for the company’s market position. Acquisitions have helped the company to enhance and expand its information storage, content management and archiving segments. Over the last couple of years, EMC has made important acquisitions that enhanced its security offerings, data clouds & analytics and storage systems.
Moreover, we believe that the acquisition will provide EMC a significant competitive edge in the storage market, where it faces stiff competition from NetApp (NTAP), Hewlett-Packard (HPQ), IBM Corp. (IBM), Hitachi and Dell Inc. (DELL). However, the overall sluggish IT spending trend, and lackluster North American and European growth are the potential headwinds going forward.
Thus, we remain Neutral over the long term (6-12 months). Currently, EMC has a Zacks #2 Rank, which implies a Buy rating in the near term on the back of strong results and strategic acquisitions.
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