Research Note: Cohesity to acquire Veritas’ data protection assets creating new $7 billion business

Cohesity, Inc. has announced the acquisition of Veritas Technologies’ data protection division. The combined entity will have an aggregate turnover of $1.6 billion, $1.3 billion in ARR and a valuation of $7 billion. With a mix of modern and legacy technologies, how will the future Cohesity compete in the data protection market?

Background

Cohesity and Veritas Technologies LLC have announced the acquisition of Veritas’ data protection business by Cohesity, creating a new combined entity that will continue to be run by Cohesity CEO Sanjay Poonen. The remainder of Veritas’ data security assets will be transferred to a new company, yet to be named. From details in the press release, the acquired assets will include NetBackup and Veritas Alta.

Cohesity was founded in June 2013 by Mohit Aron (formerly of Nutanix) as a data protection company selling backup appliances. The “secret sauce” of the solutions offering was a scale-out file system that supported infinite snapshots and was designed to support secondary data. Over time, Cohesity has expanded to focus on data security while also offering application marketplace solutions and the features of an unstructured data store for file and object content.

Cohesity has expanded into the public cloud with SaaS data protection, cyber vaulting, and threat protection. However, these products are not natively integrated into the public cloud ecosystem.

Veritas Technologies has a long history of data storage and data protection software solutions. The company was founded in 1989 and evolved from Tolerant Systems (a hardware manufacturer of Unix systems). Veritas developed storage management solutions for Unix, including the Veritas file system (VxFS), which is used widely to add resiliency and availability for data storage on Unix and Windows systems.

In 1997, Veritas acquired OpenVision Technologies, Inc. and the NetBackup platform. Later, in 1999, Veritas acquired software assets from Seagate Technology, including Backup Exec, providing data protection for both enterprise and SMB/mid-range customers.

Veritas merged with security software vendor Symantec in 2004 (completed in 2005). In 2014, Symantec split into two companies, retaining security solutions under the Symantec brand and data protection solutions in a new company called Veritas Technologies Corporation.

In August 2015, Symantec sold Veritas Technologies Corporation to The Carlyle Group, which took Veritas private. The company rebranded as Veritas Technologies LLC.

Legacy

Veritas has a strong presence in the enterprise with the legacy NetBackup platform, which is still available today. In 2022, Veritas launched Alta, a new SaaS cloud-based backup solution. This now includes Alta View, a cloud-based management console. We believe that Alta View uses NetBackup as the data protection engine in a similar way that Commvault used its on-premises technology to build Metallic.

Long Tail

So, what is the rationale for Cohesity, a modern data protection vendor, to acquire Veritas, a relatively legacy vendor? The data protection market is “sticky” and has a long tail of customer retention. Backups need to be kept for many years (in some cases decades), while there are few (if any) tools capable of moving historical backups between platforms.

In a move that echoes the acquisition of VMware by Broadcom, Cohesity has picked up a (presumably) profitable legacy business of customers it can mine for future transition to the Cohesity platform. The combined company, at $1.6 billion in revenue, looks like a better proposition for an IPO, providing The Carlyle Group with equity in Cohesity that can be more easily crystallised as profit when either an IPO or an acquisition takes place.

Of course, Cohesity also gains a cloud-based data protection solution with Alta that includes SaaS backup and backup of SaaS solutions.

The Architect’s View®

This move by Cohesity and Veritas is clever strategic positioning on many levels. First, it provides an exit to a legacy data protection business that was unlikely to be growing but was probably profitable. It provides Cohesity with a combined revenue greater than that of the competition, such as Commvault ($784 million in FY2023) or Rubrik (self-proclaimed $500 million ARR). It puts the company in a solid competitive position compared to Veeam (self-proclaimed annual revenue around $1.5 billion) or Dell Technologies.

With two sets of products, Cohesity can help customers in the transition to cloud-based data protection while managing the gradual attrition of legacy backups. This is achievable across two solutions, which could facilitate onboarding legacy historical backups into a cloud-based platform.

Finally, we should look at the IPO market and the potential to go public. Rubrik has already stated an intention to push towards an IPO in April 2024. With only around $500-600 million in ARR, Cohesity could look like a better investment, especially if the combined entity is profitable.

We’ve talked about the rivalry between Rubrik and Cohesity in previous blog posts. This acquisition re-ignites that competition and takes it to another level.

Background

Legacy

Long Tail

The Architect’s View®

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