US-based data warehouse and engineering company Cloudera has agreed a merger with Santa Clara-headquartered Hortonworks in an all-stock deal unanimously signed off by both companies’ boards of directors and welcomed by analysts.
The “merger of equals” will create a company with a combined equity value of $5.2 billion. The two companies both focus on managed open source services, with a emphasis on Apache Hadoop, the big data processing engine.
Hortonworks Cloudera Merger: “A Lot of Price Pressure”
Tom Reilly, Cloudera’s CEO said: “Our businesses are highly complementary and strategic. By bringing together Hortonworks’ investments in end-to-end data management with Cloudera’s investments in data warehousing and machine learning, we will deliver the industry’s first enterprise data cloud from the Edge to AI.”
It was a deal welcomed by one industry observer, Confluent’s CEO and Jay Kreps, who told Computer Business Review in an emailed statement: “This is a smart, strategic move for both parties – and possibly even a necessary one because Hadoop, the core of their offering, is no longer the hot new technology it once was.”
He added: “Cloudera and Hortonworks both provide slightly different flavors of essentially the same product, so they’ve been highly competitive, and this fierce competition has created a lot of price pressure. This has been good for customers but bad for Cloudera and Hortonworks as businesses trying to get to profitability.
“These days these two former mortal enemies face a much bigger threat from AWS and other cloud vendors that provide analytics and data management offerings as a service. I think this merger will help both companies command higher prices and refocus their development to modernize and compete in the new cloud-centric world.”
Cloudera Hortonworks Merger Benefits
The two said they see the merger as expanding market opportunity with complementary offerings, including Hortonworks DataFlow and Cloudera Data Science Workbench.
It “enhances partnerships with public cloud vendors and systems integrators” and is expected to generate significant financial benefits and improved margin profile, creating a company that will generate approximately $720 million in revenue, with over 2,500 customers and create more than $125 million in annual cost synergies.
The board of directors of the newly-formed company will initially comprise nine directors. Four directors will come from Hortonworks’ existing board of directors. Five directors will come from Cloudera’s existing board of directors. A tenth director will be selected by the combined board. The deal is subject to customary regulary approval.