Iron Mountain Acquires Mimosa
Iron Mountain announced it has acquired Mimosa Systems. This puts an end to over a year of rumors concerning Mimosa's acquisition discussions with a number of possible suitors.
Iron Mountain has a vested interest in building bridges between customer on-premise deployments and its Digital Archive, and the company has been building partnerships with numerous on-premise archiving vendors to build bridges into their products. The idea is that as on-premise archives grow stale, customers will treat Digital Archive as a third tier of nearline storage at Iron Mountain's hosting facilities. Today's move places Iron Mountain into direct competition with other archiving vendors, and therefore casts a shadow over its partnership initiatives.
- Allows Iron Mountain to offer on-premise archiving. That makes sense.
- Iron Mountain acquires a good-size customer pool that it will no doubt try to upsell into its Digital Archive.
- Also provides a new offering for Digital Archive customers.
- It seems rather late in the game to be entering the on-premise archiving market. Two powerful forces that Iron Mountain faces are the shift toward storing data in the cloud, and native archiving capabilities included in platforms such as Exchange 2010.
- By virtue of its leadership position in hardcopy archiving, Iron Mountain could be a dominant force in digital archiving. It has failed so far to achieve such a position.
- Iron Mountain is most reticent to give figures about its digital archiving business. We suspect that despite its major name in hardcopy archiving, those revenues are extremely modest.
- Iron Mountain has a series of archiving offerings that must now be sorted out. For example, it has its own code, plus offerings from MessageOne and MIMEcast. Products or services will need to be dropped, and interfaces made consistent. Integrating different products is difficult, and it's not clear Iron Mountain has good skills in this regard.
- Iron Mountain has a very confusing mix of digital offerings. It badly needs to develop a clear vision of how these fit together.
- We hear that partly because of this confusion, the Iron Mountain sales team has a tough time selling the digital archiving portfolio.
- A million dollars here, a million dollars there, pretty soon you're talking about real money ..... On the other hand, Iron Mountain is a large company. It can afford to invest $100M or so in acquisitions, without having to worry too much about the success of the investment.
- Iron Mountain has made a number of acquisitions, and established a number of technology partnerships. Some have gained traction, others haven't. Overall, it feels like a strategy of trying this and that, and seeing what works. If you're a big, rich, successful company, you can afford that approach.
Regarding the transaction:
- Mimosa was generating about $25M/year and had flat revenues.
- Mimosa had never been profitable. It was probably losing about $10M/year.
- Mimosa took around $70M to $100M in investment funding. The investors had evidently decided not to put in more money, and the company was forced to find a buyer. See our December 2009 bulletin, "Mimosa Funding Challenges".
- The $112M valuation is a roughly 4.5 multiplier on sales. This is an excellent price for shareholders, especially in today's climate. The goodwill generated toward Iron Mountain will help ease the trauma of a merger.
- We presume the VCs will get their money back, and the founders will get a small amount of money, but not enough to retire. Everyone else is probably wiped out.
- The $112M was probably largely determined so that VCs and bank-like creditors get their cash back.
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