Why Cisco Should – And Should Not – Acquire Pure Storage
Flash memory has become absolutely normal in the datacenter, but that does not mean it is ubiquitous and it most certainly does not mean that all flash arrays, whether homegrown and embedded in servers or purchased as appliances, are created equal. They are not, and you can tell not only from the feeds and speeds, but from the dollars and sense. It has been nine years since Pure Storage, one of the original flash array upstarts, was founded and seven years since the company dropped out of stealth with its first generation of FlashArray products. In that relatively short time, the company has ramped up its sales and engineering teams, growing its customer base and widening its product line and addressable markets, and as its fiscal 2018 came to a close in January, it broke through the $1 billion revenue barrier, about a year faster than many predicted it could. The company’s success, with over 4,500 customers – starting in the enterprise, but now branching out into HPC centers and the AI applications of companies of all kinds – is remarkable. Frankly, there probably has not been a storage company to take off like this since @EMC shifted from making DRAM main memory cards for systems in the 1980s to making the extremely well architected Symmetrix block storage arrays based on disk drives, front ended by giant banks of memory and back ended by RAID arrays of cheap disks, in 1990. The Symmetrix was wildly popular on all kinds of platforms, from mainframes to Unix systems, setting EMC up to generate $9 billion in sales a year by the end of the decade. @Pure Storage is not growing as explosively as @EMC did back then, but it has beat the pace of @NetApp, which innovated in network file storage and also very quickly grew to be a $1 billion company during the early years of the commercial Internet boom. Here in the 21st century, the Internet is so normal no one even talks about it that way anymore, and the limitations of disk-based storage are inhibiting applications in myriad ways. Hyperscalers and cloud builders, who have exabytes of storage for the services they provide to their millions and sometimes billions of customers, have to make use of disk drives for bulk storage. But smaller enterprises – meaning everyone else in the Global 2000 and anything smaller – don’t have the same storage needs, and an increasing number of them can use all-flash arrays for some or all of their applications. Pure Storage has its venerable FlashArray line for block storage (databases and virtualized server environments) and FlashBlade for unstructured data commonly generated by web applications and consumed by machine learning applications or for more modeling and simulation workloads in the traditional HPC realm. As Pure Storage closed out its fiscal 2018 year, it not only broke through the $1 billion revenue barrier, but it had positive cash flow for the year and, ever so slowly, is making its way to breakeven and profitability. Pure Storage had $530.9 million pumped into it in six rounds of venture funding before it went public in October 2015, when it raised another $450 million from Wall Street with its initial public offering. The venture and IPO money is how Pure Storage could be patient and help the flash market mature in the enterprise, and its engineering – often ahead of the curve of other all-flash array players – means that it is on the cutting edge but not on the bleeding edge where enterprises get nervous. In the past four fiscal years, Pure Storage has booked cumulative losses of $819 million against sales of $2.37 billion, and the initial shareholders have been paid back for those funds (which covered the losses and paid for the hardware and software engineering) with the $3 billion valuation on IPO day, which has grown to $4.55 billion as last week came to a close, an increase of 52 percent in a little more than two years and not a bad return.