Barracuda Networks Inc. is buying Intronis Inc. for MSP-centric cloud backup capabilities for $65 million, according to an SEC filing reviewed by ChannelE2E. In related news, Barracuda shares are dropping sharply -- down about 20 percent in late trading today-- amid an earnings miss that has some investors concerned.
In Barracuda's quarterly financial results today, the company confirmed the Intronis buyout, stating:
"The Intronis ECHOplatform currently enables nearly 2,000 managed service providers (MSPs) which today serve more than 36,000 end customers in the small business and mid-market segment. Intronis’ focus on the MSP experience and award-winning infrastructure will expand Barracuda’s channel reach in the fast-growing MSP partner segment. There are, according to Gartner1, significant opportunities for MSPs to support their clients’ cloud migration plans and their IT service deployment, management and security needs."
The deal comes one day after ChannelE2E speculated about Intronis' future as an independent, private-equity backed company since (A) the cloud backup market is so crowded and (B) the company's private equity investors had been backing the company since 2007 or so.
Indeed, the managed services software market is poised for consolidation as some private equity firms seek to unlock value from some of their earlier deals. Moreover, MSPs are looking for end-to-end management platforms that transform RMM, PSA, BDR and security into total business management (TBM) solutions.
Barracuda Pays $65 Million for Intronis
ChannelE2E confirmed the deal's value through an SEC filing. Barracuda is paying $65 million cash for Intronis. A $7 million sum will be held in escrow under certain terms of the deal. The transaction is expected to close in the third quarter of Barracuda's fiscal year 2016.
Based on the $65 million buyout figure, ChannelE2E estimates that Barracuda paid somewhere between 3X and 5X revenues for Intronis.
Intronis and MSP Cloud Storage
Intronis was one of the first companies to engage MSPs with cloud-centric backup. Co-founders Sam Gutmann (formerly CEO, now at OwnBackup) and Neal Bradbury (now channel chief at Intronis) have a partner-first mentality. Current Intronis CEO Rick Faulk and Chief Marketing Officer Aaron Dun have maintained the company's partner-first DNA.
Reacting to news of the deal, Gutmann told ChannelE2E: "Happy to see that my friend and co-founder, Neal Bradbury, will continue to have an impactful role in the MSP channel. Albeit in a larger organization with more resources and hopefully more value to deliver."
Intronis has a strong track record for MSP engagement and support. However, the company has hit some challenges over the years -- especially as rival storage companies moved into the cloud backup market. ChannelE2E does not have access to Intronis' financial records, but we sense that the company had somewhat of a financial pivot when it shifted to a flat-fee, unlimited storage pricing model in mid-2014.
Barracuda Networks and IT Channel Resellers, VARs
Barracuda, meanwhile, has a mixed history in the IT channel. During drive-time commutes in New York, radio ads promote direct sales of Barracuda appliances to end-customers -- a move that sometimes upsets partners.
Barracuda enhanced its partner program in April 2015, in a bid to strengthen relations with resellers and VARs.
One suggestion from ChannelE2E: Barracuda should run Intronis the way SolarWinds runs its N-able acquisition.
Barracuda's Reach
Generally speaking, Barracuda is larger than most of the software companies that currently target MSPs. For its Q2 fiscal 2016 results, announced today, Barracuda said:
- Total revenue increased 14% to $78.4 million, up from $68.7 million in the second quarter of fiscal 2015.
- Net loss in the second quarter of fiscal 2016 was $2.2 million, or $0.04 loss per share.
Although Barracuda is large, Wall Street was expecting better results. As of 5:27 p.m. ET today, Barracuda's stock is down about 20 percent because investors are worried about the weaker-than-expected earnings results.
