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Pure Storage (PSTG) to Buy Portworx, Augment Cloud Services

Pure Storage Inc. PSTG recently announced its plan to acquire Portworx to improve its could-services solutions for Kubernetes and containers technology. The Portworx acquisition is valued at $370 million, making it the most expensive buy out for Pure Storage till date.

The closure of this acquisition, subject to regulatory approval and other customary closing conditions, has not been specified by either of the companies. Post the conclusion, Portworx team led by CEO Murli Thirumale will join Pure Storage as part of the newly-created division — Cloud Native Business Unit.

Los Altos, CA-based Portworx was founded in 2014 by Thirumale, Goutham Rao and Vinod Jayaraman. The company focusses on Kubernetes data services and offers its customers extensive data protection along with cloud mobility for containers running on hybrid clouds.

Pure Storage, Inc. Price and Consensus

Pure Storage, Inc. Price and Consensus
Pure Storage, Inc. Price and Consensus

Pure Storage, Inc. price-consensus-chart | Pure Storage, Inc. Quote

Moreover, its clientele boasts of names like Comcast CMCSA, GE Digital, Lufthansa, Kroger KR, Carrefour and T-Mobile, which is a tailwind.

Pure Storage will integrate Portworx Kubernetes data services platform with its Pure Service Orchestrator software and other data services platforms to accelerate digital transformation for its customers.

Post the integration, Pure Storage’s data services solutions can be used by customers for deployment on bare metal, in the cloud and on enterprise arrays that are utilizing Kubernetes containerized applications technology.

The deal underscores Pure Storage’s initiatives to expand in the rapidly growing cloud market. This is likely to boost investor confidence in the stock. Notably, on a year-to-date basis, shares of Pure Storage have declined 13.1% compared with industry’s decline of 27.5%.

Momentum in Cloud & Containerized Applications Bodes Well

Deployment of multi-cloud model and cloud-based storage solutions, to improve scalability and achieve better resource utilization is becoming mainstream.
Moreover, exponential growth in enterprise data resulting from coronavirus crisis triggered work-from-home wave, calls for an effective storage services platform to support complex cloud native applications.

Per MarketsandMarkets data, the cloud storage market is envisioned to reach $137.3 billion by 2025 from $50.1 billion valued in 2020 at a CAGR of 22.3%. Per a Mordor Intelligence report, hybrid cloud market is projected to reach $128.01 billion at a CAGR of 18.7% from 2020 to 2025.

Moreover, enterprises are swiftly deploying containerised applications. Per Gartner data, as revealed by Pure Storage in the press release, more than 85% of organisations across the globe will be utilizing container applications by 2025 compared with less than 35% in 2019.

Higher usage of cloud computing especially hybrid cloud and a rapidly growing IoT market are anticipated to substantially boost the market growth for containerised applications. The worldwide application container market is expected to grow at a CAGR of 26.5% from 2019 to 2025, per a Grand View Research report.

Containerization application refers to operating system level virtualization process that runs different applications without initiating the entire virtual machine (VM) each time for each app. This offers benefits of portability, isolation and ease of management compared with virtualization.

Kubernetes is one of the leading open source platforms for container orchestration that enables deployment and management of containerized applications.

We believe that the acquisition of Portworx will enable Pure Storage to boost its presence in booming cloud storage space and drive the top line in the coming days.

However, coronavirus crisis-induced business uncertainty and sluggish enterprise IT spending are likely to dampen growth, at least in the near term. Additionally, growing expenses on product development amid stiff competition from NetApp NTAP remains a headwind.

Zacks Rank

Currently, Pure Storage carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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