Over the transom yesterday slipped from Summit Redstone’s Srini Nandury about things he’s learned while chatting with various unnamed sources in Silicon Valley. Among the interesting tidbits Nandury brings up is that #CiscoSystems ( #CSCO ) needs to buy #NetApp ( #NTAP ), that #PureStorage ( #PSTG ) has sought to sell itself, and that #Amazon s ( #AMZN ) #AWS #cloudcomputing service is turning off some customers with its pricing. NetApp shares are up $1.28, or 3%, at $41.92, today, lifted by an upgrade by Steve Milunovich of UBS, who this morning raised his rating to a Buy from Neutral, and raised hits price target to $45 from $42, writing that the company’s revamp of its software is helping revive its sales in the flash-memory-based storage category. Nandury describes talking last week with "some Silicon Valley industry insiders, executives at various startups, VCs, and leaders of established companies." One finding of those conversations is that Cisco is "likely to acquire NetApp rather than Pure Storage, given that NetApp will be immediately accretive ($5.8bln revenue for 2018)." Nandury describes how Cisco is weaker than it should be in the area of data center gear versus Hewlett Packard Enterprise (HPE), so it needs NetApp: While the security products strategy is fully flushed out, the data center side of the business needs help. The company cannot compete head-on with both HPE and Dell/EMC on the server and storage side. Given that Cisco lacks a compelling storage portfolio of its own, it cannot use bundling to lock up its install base or go after the install bases of HPE and Dell. Therefore, Cisco is looking to expand its datacenter portfolio and that means acquiring storage assets […] To round out its server portfolio, #Cisco needs primary and secondary storage offerings, since Cisco is competing extensively with both #HP and #Dell. We expect Cisco to acquire both #NetApp and a well-funded backup software startup #Cohesity. Both these acquisitions will help Cisco grow its data center business. Our sources indicated that NetApp is one name that is often discussed. NetApp is the only storage name that seems to be executing at the moment and growing while #HPE, #IBM and #DellEMC continue to decline. As for #Pure, “based on our conversations, Pure Storage has approached number of large OEMs including Cisco, HP, and IBM for a potential takeout,” he writes. Our sources indicate that the company realizes that acquiring new customers is slow and tedious, given that the power of incumbency in storage is hard to dislodge. We believe much of the low-hanging fruit may very well have been picked, for the traditional Flash Array product and the company has a room for now to grow its Flash Blade product. Regarding Amazon, Nandury has a whole disquisition on why the company’s technology "is proving too expensive for many companies that are born in the cloud,” citing examples of companies such as Dropbox that have “already scaled back their public cloud use." "We are beginning to see workloads migrate back to hybrid data centers,” he writes, “we expect this trend to continue."
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