Canada’s Open Text Acquires Carbonite Cloud Backup Service

Carbonite, the US cloud backup and cybersecurity firm, has agreed to a $1.42 billion buyoutOpens a new window by Canadian software business Open Text after mounting speculationOpens a new window about its future.

Open Text, which sells software for managing data to large corporations, paid $23 per share, a 78% premium on Carbonite’s September 5 share price, when Bloomberg reported the company was exploring a sale.

The price is considerably lower than Carbonite’s all-time share-price high of more than $40 in August 2018, reflecting that it had become an acquisition target. At the same time the sale was announced, Carbonite reported a quarterly loss of $13.96 million, or 40 cents a share, the Wall Street Journal said.

Name from ‘Star Wars’

Founded in Boston in 2005, Carbonite – named after the fictional substance used to freeze Han Solo in Star Wars – offers downloadable backup software for consumers and small businesses.

The software sits on users’ computers and works in the background backing up files and uploading them to Carbonite’s data center using encrypted communications.

The files are retrievable if users lose or delete them on their computers, if the device crashes or breaks down or in the event of a cyberattack.

Carbonite backed up 100 billion files between 2005 and 2009Opens a new window , and restored seven billion lost files. In 018Opens a new window , its turnover rose 24% to hit nearly $300 million with profits of some $7 million.

However, the cloud backup market has become increasingly crowded after tech giants launched their own services. Apple stores photos, messages, contacts and other files on iCloud, and a host of other cloud storage services vie for business.

Carbonite pivoted to focus on cyber-resiliency, offering data backup, disaster recovery and workload migration. It also offers alternative servers to handle computer activity after a cyberattack.

Earlier this year it paidOpens a new window  $618 million for Webroot, which provides cybersecurity for managed-service providers and small businesses.

Desktops for small business, consumers

Carbonite sells endpoint protection for terminals, network protection and security awareness training. In 2015, Carbonite headed into the mid-sized enterprise market with the acquisition of data recovery business eVault. But Carbonite’s focus is on desktops for consumers and small and medium-sized businesses.

This could be a good fit for Open Text, which is aimed more at large companies. Canada’s largest software company specializes in enterprise information management, known as EIM.

Its software helps organizations such as large corporations and government departments to manage their data, creating governance and standardization of the many sources and storage methods for data.

The software helps them make the most of their information and extract relevant insights they can use to increase sales. Open Text has 120,000 customers and 100 million end users. Revenues in 2018 were $2.8 billion.

The Carbonite acquisition signals that Open Text is looking to bolster its security credentials, vital to boosting credibility as a cloud-based EIM product.

Striving for ‘Industry 4.0′

As Open Text chief executive Mark J. Barrenechea saidOpens a new window of the deal: “Cloud platforms and secured, smart end-points are essential information management technologies as businesses transform into Industry 4.0.”

Barrenechea added that the acquisition of Carbonite adds to Open Text’s position in end point security and protection and offers access to the small business market.

The company has expanded into other areas as well. In 2017, it acquired Dell Technologies’ enterprise content division for $1.6 billion.

CRN.com, a technology news website, portrayed the acquisition as a big step for the Waterloo, Ontario-based Open Text into the small business market, as long as it doesn’t reduce the ability of Carbonite and Webroot to reach their strong base.

“Carbonite has the backup technology and Webroot has the security technology on the desktop side and those are things Open Text doesn’t have,” Ed Tatsch, president of ETS Networks, a partner with Carbonite and Webroot, told CRN.Opens a new window “Open Text is geared to the enterprise. This will be an opportunity to bring Open Text to the desktop.”