IBM buys Storwize for $140 million

IBM has signed a deal to buy Israeli high-tech firm Storwize for $140 million.

Storwize's investors have put up about $35-$40 million so far, so they will at least triple their money. IBM has bought a number of Israeli startups in the data storage sector in recent years.

Storwize provides real-time data compression technology to help clients reduce physical storage requirements. Its products are usually installed between the network and the storage devices, and compress the data before it reaches the network storage devices.

The company was founded in 2004 by Gal Naor and Jonathan Amit and employs 40, almost all in Israel. Its headquarters is in Marlborough, Mass., but its development center is in Yehud. It raised $19 million in 2008 and moved its headquarters to the U.S. at the time, and also hired CEO Ed Walsh then. The employees will join IBM's Israeli storage development center, which already has 200 employees.

	Founders Gal Naor, left, and Jonathan Amit.
	Photo by: Courtesy of Storwize

"IBM will be Storwize's engine for growth to the next stage," Naor told TheMarker. "Israel is turning into a storage superpower, even though there are not enormous storage centers here. Our advantage is that we are able to recognize problems at an early stage. Storwize's technological solution, which deals with the data even before the storage stage without affecting performance, has no competition for now and will provide IBM a significant advantage over its competitors."

IBM's 8th Israeli startup

The company is privately held and its investors include Bessemer Venture Partners, Sequoia Capital, Tenaya Capital, the Tamares Group, venture capitalist Shmil Levy and a group of Dutch private equity investors. Tenaya is Lehman Brothers' former venture capital fund. Other investors include former Bank Hapoalim chairman Shlomo Nehama and Igal Ahouvi.

But the big winners are Sequoia and Levy, who is also a partner in Sequoia. All employees have stock options and benefit from the sale, said Naor. The deal is expected to close in the third quarter.

IBM is one of Storwize's biggest customers, but the firm works with all the major storage vendors such as EMC, NetApp, Cisco, Oracle and Hitachi. IBM is expected to use Storwize's products as an integral part of its Sonas storage line.

IBM has already purchased three other Israeli companies in the storage market for over $700 million: In 2008 IBM bought XIV for over $300 million; and Diligent and FileX in the same year. IBM has bought four other Israeli startups since 2005: iPhrase in 2005, Unicorn in 2006, Watchfire in 2007 Gardium in 2009 for $225 million.

"IBM has the strongest vision for the future direction of storage and we are pleased to become a part of that vision," said Walsh. "Our customers will benefit significantly as our talented employees and innovative storage solutions merge with IBM's worldwide reach in sales, service, and research and development."

Storwize has over one hundred customers such as Mobileye, Polycom, Shopzilla, and Sumitomo Mitsui Construction across a wide range of industries including energy, manufacturing, finance, insurance, telecommunications and cloud service.

"Real-time data compression helps address a significant client need - making it affordable to analyze and make sense of massive amounts of data in order to provide new services," said Brian Truskowski, general manager of IBM System Storage and Networking. "By adding Storwize to our innovative portfolio of storage solutions, IBM is better equipped than ever to help clients handle growing quantities of data and make more of it available for analytics."