EMC (NYSE: EMC ) is at it again. The data storage king, which fueled a turnaround through savvy shopping, this week bought another small firm that could fuel growth. This time the target was privately held Rainfinity, purchased for roughly $100 million.
It's interesting to note that this deal is remarkably small when compared with other recent EMC buys. For example, SMARTS was acquired for $260 million. And the total price tag to nab Documentum, Legato Systems, and high-flying VMWare totaled a heady $3.6 billion.
So, why get excited this time? Two words, Fool: account control.
Rainfinity has 50 customers. It's a good bet that a fair portion of those accounts would be new to EMC, and ripe for selling more EMC products. You see, Rainfinity complements EMC's strategy of "information lifecycle management" by making it very easy to move digital files without interrupting a network. Therein lies the so-called synergy that creates a rationale for the acquisition. (Yeah, I know, that sounds sooooo Dilbert. But it's true.)
I'll understand if investors remain ho-hum about this deal. After all, the premium was probably no more than three times sales, which means Rainfinity's 50 regulars probably account for somewhere between $30 million and $50 million in revenue annually. That's peanuts for a firm that did almost $9 billion in sales over the trailing 12 months.
But that's the short-term view. Account control is still everything when it comes to selling big chunks of indispensable hardware and software. Otherwise old-tech giants such as Cisco (Nasdaq: CSCO ) and Oracle (Nasdaq: ORCL ) would have gone stagnant years ago. Instead, they've just kept growing. And growing. And growing. Don't be surprised if EMC manages the same.
Get your fix of techie Foolishness with these related tidbits:
- Too many got worked up over EMC's Q2. They should've just checked the facts.
- Acquisitions aren't the only thing EMC is investing in.
- What's your take on EMC's strategy? Tell us on the EMC discussion board.
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Fool contributor Tim Beyers wishes he could acquire more time on the cheap. Tim owns shares of Oracle. You can find out what else is in his portfolio by checking Tim's Fool profile, which is here. The Fool has an ironclad disclosure policy.