EMC plans to buy Isilon Systems for $2.25 billion

EMC Corp., the biggest maker of corporate data storage equipment, plans to buy smaller rival Isilon Systems Inc for $2.25 billion as consolidation in the technology sector gains steam.

Large, cash-rich technology companies like EMC are buying up smaller rivals as they position themselves for an economic recovery.

Data storage companies have been among the hottest targets in the recent round of consolidation as they play a crucial role in “cloud computing” — the use of technology to access remote computing power and data over the Internet.

“The unmistakable waves of cloud computing and ‘Big Data’ are upon us,” EMC Chief Executive Joe Tucci said in a statement. “Customers are looking for new ways to store, protect, secure and add intelligence to the vast amounts of information they will accumulate over the next decade.”

EMC’s $33.85-a-share cash offer for Isilon, announced by both companies Monday, represents a 29% premium over Isilon’s closing share price Friday.

The growing popularity of online video from media companies, and new software from industries like life sciences, particularly related to gene sequencing, are expected to generate exponentially large amounts of data.

EMC, IBM Corp., Hewlett-Packard Co., Dell Inc. and Oracle Corp. are jostling for dominance in the storage market. HP bought 3Par Inc. for $2.4 billion this year after a heated battle with Dell, and IBM completed the $1.7-billion acquisition of Netezza Corp. last week.

Isilon shares had already rallied about 56% over the last three months amid persistent speculation that the Seattle company would quickly be sold in the wake of the 3Par deal.

Jefferies & Co. analyst Bill Choi expects consolidation to continue in the sector. He cited Compellent Technologies Inc., CommVault Systems Inc. and NetApp Inc. as potential targets. Activist investors are pushing Symantec Corp. to consider strategic options, including a spinoff of its storage management software business.

Isilon sells so-called mid-range storage equipment that is easy to configure, an area in which Hopkinton, Mass.-based EMC needs to improve its portfolio, Choi said. That would help it better compete with NetApp, the leader in that segment of the market, he added.

Isilon shares gained $7.48, or 28%, to $33.77. EMC shares fell 27 cents to $21.45.