NetApp to buy data security vendor Decru for $272M

Data storage vendor Network Appliance is to acquire data security firm Decru for $272 million in cash and stock, the company announced Thursday. NetApp hopes the purchase will help it compete more effectively in the storage security space against the likes of EMC, Hewlett-Packard, and IBM.

Decru DataFort appliances protect stored data via encryption, authentication and secure logging and access controls.

Privately held Decru out of Redwood City, California, was founded in April 2001 and employs 73 staff around the globe. NetApp expects to close the acquisition by October subject to the usual regulatory reviews. The two companies have been working closely together since January 2004 with corporates and government agencies.

Dave Hitz, NetApp cofounder and executive vice president, positioned the purchase as part of his company’s ongoing strategy dating back three years to move away from being purely a storage systems vendor into other areas, notably storage data protection.

“We believe Decru as part of NetApp can grow much more quickly,” Hitz said in a phone interview. He also suggested that customers looking to encrypt their data for a long period of time might feel more confident with Decru under the NetApp umbrella than with Decru alone. “We’re been around for over a decade and we have a billion dollars in the bank. We’re making Decru a much safer choice for customers,” he said.

NetApp will run Decru as an independent business unit with an independent sales force, according to Hitz. Whether the unit’s name will remain Decru is yet to be determined, but he expects all of the startup’s 73 staff to transition over to NetApp. The plan will be for Decru to continue to partner with other storage vendors. To date, over half of the startup’s product sales were with NetApp systems, but Hitz said that sales with EMC and StorageTek systems were also significant.

Decru has 100-plus customers worldwide, notably the U.S. Army, Navy, Air Force, Marines and the Office of the Secretary of Defense. Other users include the city of Verona, Italy, using DataFort to secure citizen data in a system expected to go countrywide and Tokyo Broadcasting System Inc., which is storing personal information from its television viewers.

Analysts welcomed NetApp’s purchase. “It’s a very good fit,” said Anne MacFarland, director of infrastructure architecture and solutions at Wellesley, Massachusetts-based analyst Clipper Group. “Of the viable companies in the [storage security] space, Decru is certainly the leader,” she added. “NetApp basically acted in a timely fashion to snap up an encryption company.”

Charles King, principal analyst with Pund-IT Research of Hayward, California, said NetApp had “paid a premium” for Decru. “They will have to operate Decru as an independent unit in order to make money,” he added. “I don’t think the deal would make sense if NetApp brought Decru inhouse and used their technology for their own applications.”

Both MacFarland and King think NetApp will be able to maintain Decru’s independence so the company can continue to partner with other storage vendors who are also NetApp’s competitors. They cited examples of other storage companies that have already set up similar arrangements with companies they’ve acquired, notably EMC with VMware and Sun Microsystems’s plans for StorageTek.