Online storage is back. Last September, EMC bought online storage startup Mozy for $76 million. Last week, Symantec signed a deal brewing since February to buy SwapDrive. A source close to the company says that Symantec paid $123 million.
According to my source, the company made $13 million in profits last year, on revenues of $22 million. That’s up from $5 million in revenues the year before, and the company is projecting $40 million in revenues this year. Those numbers put the acquisition at roughly 10X profits and 5.6X revenues (most likely those are operating profits, but my source couldn’t say for sure).
Neither Symantec nor SwapDrive issued a press release, but if you go to SwapDrive or Backup.com (the other site it operates) they are both identified as now being operated by Symantec. And Symantec’s PR firm confirms that the acquisition took place and offers the following statement from the company:
Symantec has signed a definitive agreement to purchase SwapDrive, a privately-held online storage company to strengthen the services offerings in the Norton consumer portfolio and to help consumers manage data across their devices. This is a small, targeted acquisition and is a very natural move for us because of our close two-year OEM relationship and existing product partnership on Norton 360. The transaction is expected to close by the end of the June 2008 quarter.
Backup.com alone claims to have 2 million users. In an era where you can get 5 GB of storage for free (from Microsoft’s SkyDrive or AOL’s XDrive, for instance), both SwapDrive and Backup manage to charge $50 a year for 2GB of storage ($100 a year for 5GB). Yeah, I was scratching my head too.
It turns out the real growth-driver for the business is as a white-label online backup and storage service. The company, which was founded in 1998 and is based in Washington, D.C., powers the online backup services sold by more than 60 partners, including Iomega, Dell, Intuit, Best Buy, and Symantec. All told, the company is adding 13,000 new customers a day, and has 50 employees. The company raised $2.65 million in a series A round in 2001 from Core Capital Partners and some angels. It raised another round later from Contour Ventures and ASAP Ventures. We are still trying to find out the total amount raised, but it is fair to assume that the investors made a very decent return.
5.6x revenue? Where’s the massive multiple due any .com company? Should be at least 50x revenue.
(disclaimer: I just woke up from an 8 year coma. How’s my pets.com stock doing?)
Shoe ..You are sick LOL !
Ok .. I need to sell my domain .. I guess my domain should be hot too .
backupyourwebsite.com There is no site .. I want $1 million .. You can start your own backup company and sell it for $100 in 2010 .
White-labeling it is not a bad idea but they’ll probably have a hard time to compete with Amazon S3. Anyone can put up their own interface and processes there and ’sell’ an online storage service. Interesting to see how they position themselves.
I am surprised they made a profit considering how saturated and competitive the marketplace is but when you consider they may be one of the first to enter this marketplace then it makes sense that they have been able to grow and generate decent revenue by any standards.
Jon
http://woodmarvels.com – Create Unique Memories
I’m curious to find out the reason why both companies failed to issue a press release or at least some kind of statement about the buyout…? Perhaps they depended on TC to relay the news to the masses.
It was clear for a while that Symantec wasn’t going to get SPN to market in any real way without an acquisition. Let’s hope they don’t repeat the Opelin / Upline disaster. This seems like a smart move by a company with massive consumer and small business reach.
Also, for whatever its worth, I doubt they are powering Iomega’s offering since, like Mozy, they are now a part of EMC…
Press release? You mean like this one:
http://www.syma...antec_swapdrive
Could TC cover my search engine, http://www.z-portal.uni.cc/
The online backup industry is now maturing and getting the attention of big corporations.
EMC acuired Mozy for $76 mill, Seagate acquired Evault for $185 Mill, Iron Mountain acquired LiveVault for $50 Mill, among many of the recent transactions.
I think SwapDrive did very well in this transaction, fetching $123 Million!
Judging by the ranking of backupreview.info (an excellent site for the online backup industry) Carbonite (top ranked) could be sold for more than $300 million.
The post is right on the money in asking the right questions about operating profits and signups when there are free options available. However, the reference sites quoted: skydrive and xdrive have almost no connection with the post. They are both pure play online storage services.
Author needs to realize that there are significant differences between what an online backup service constitutes and what online storage does. A reference mention of mozy, carbonite and IDrive would have been more appropriate for this article.
Gah, Symantec. Quick, everyone foolish enough to be with this service cancel their accounts before it goes the way of (to name but one example) PartitionMagic.
I think now with the new services that offer large bandwith, we can think to have large backups in the net, but… who waranties that data’ll be there when you want? And they will be unviolable?
Online storage will prevail. Smart move by Symantec!
Well, with Mozy and Swapdrive no longer independent companies, that leaves us as the only major pure play in the market.
The Swapdrive acquisition was anticipated since Symantec is completely dependent now on Swapdrive for the 2GB free backup that is included with every copy of Norton 360. Similarly, I suspect that Swapdrive is no doubt highly dependent on Symantec for their revenues. That’s the problem with a purely white-label strategy. With all our competitors getting snapped up by big old industry giants, I felt compelled to comment on what Symantec’s acquisition of SwapDrive means to Carbonite, so I’ve posted my comments on our corporate blog.
Summary:
1) Big endorsement of online backup by a major industry company. Rising tide lifts all boats.
2) Can Carbonite become the trusted brand in online backup? Will we be able to do for online backup what Norton originally did for anti-virus?
3) Carbonite is spending heavily on building a trusted brand. Will our brand accrue to the benefit of our marketing partners?
I’d be interested to hear reader’s comments on our strategy and invite you to post on my blog. .
Regards,
David Friend, CEO
Carbonite, Inc.
David Friend,
I agree; rising tide lifts all boats! As a fellow online backup service provider, we are glad that the online backup market is gaining traction. I beg to differ on one point though: IDrive is a significant player too. Carbonite is not the only game in town.
It will be interesting to see how the tactics of each player in this field unfolds; It still is fragmented as we see now and with all the buyouts so far; It will also be interesting to see how google and pure play internet giants play this game.
Raghu
IDrive.com
While I tend not to believe they have $13 million in profit, the amount of revenue is already very impressive. This makes a lot of other small companies feel shy. In this business, most companies are money-losing: just think about some companies offering 2GB to 50GB free storage, or charging only $50/year for unlimited storage… while the storage price is going down, operating a backup service is not the same as using some raw cheap hard disks. We are not sure how the free / cheap service providers can survive without a buyout by some big old industry giant.
DriveHQ.com is another major Online Storage and Online Backup service provider.
Like SwapDrive, DriveHQ has Online Storage and Sharing service based on the DriveHQ.com website, FTP and DriveHQ FileManager client software; and we also have business-class Online Backup service using DriveHQ Online Backup enterprise edition.
Unlike many other companies, DriveHQ is not funded by VCs. We have spent many years developing top-notch products and technologies. We make money by offering top-quality products and services to our customers and creating value for them. We offer customized services to small and big companies. Our service has powered from big telecom service providers to small accounting firms, etc. While we look forward to having some good luck, our business focus has always been to create value for our customers and stay profitable. At end of the day, we believe if online storage and online backup is really important for customers, they will pay for it at a good price.
John
http://www.drivehq.com/
Regarding EMC, and probably all other storage companies are moving towards a cloud computing model. A recent article by Mike Karp talks about how nowhere does EMC see cloud computing as supplanting the data center.
I would had thought they will eventually supplant them, but the model is still to be proven for more critical tasks.
Carbonite offers an unlimited plan. They keep raising money because they keep burning money. I imagine that David is waiting by the phone for a call from one of those industry giants to save him. He probably spends the rest of his time on the next round of funding.
What happened to the idea of building a business that will be profitable without spending 30M on the way? The VC will be looking for a multiple of 10 on their money and that forces the business to do things like offer unlimited plans, gain millions of clients and then pray for a buyout.