Sujal Patel

EMC Corp. announced a deal this morning to acquire Seattle-based data storage company Isilon Systems for $2.25 billion, or $33.85 per share -- a 29 percent premium over Isilon's previous closing price. It follows the turnaround of Isilon under co-founder Sujal Patel, who returned as CEO in 2007.

“Our excitement about the opportunity to become part of EMC’s world-class team cannot be overstated," says Patel in the EMC news release announcing the deal. "EMC’s track record of successfully acquiring, integrating and growing leading companies and the complementary nature of our technologies are undeniable."

Isilon has 500 employees, according to a presentation (PDF) used by the companies in a conference call about the acquisition this morning. We're contacting Isilon to find out the impact of the acquisition on employment and other aspects of its operations in the Seattle region. The conference call presentation highlighted Isilon's work for customers including Kodak and Sony, and said its offerings are complementary to EMC.

The EMC news release cites Isilon's status as the recognized "leader and momentum player" in the area of scale-out network attached storage -- an overall segment that IDC forecasts to grow 36 percent annually, to reach $6 billion a year by 2010.

Rumors of an Isilon sale arose in early October after Bloomberg reported that the storage company had hired Frank Quattrone’s Qatalyst Partners as an investment adviser. The deal also comes just over two months after H-P won a bidding war against Dell to buy data storage company 3Par for $2.35 billion.

Isilon's storage products

EMC executives today declined to say whether there were competing bids for Isilon, but the price tag would indicate that other companies were at least sniffing around.

Isilon's comeback under Patel -- who was reinstituted as CEO in 2007 after some accounting problems -- is noteworthy. The former RealNetworks manager repositioned the company, instituting more of an aggressive startup culture.

The stock price responded. So far this year, shares of Isilon have skyrocketed more than 390 percent. The stock is up $7.50 today, trading at $33.79. That's an all-time high.

In a conference call this morning, Patel said that the EMC acquisition is "truly an exciting and historic day for Isilon." He added that the EMC represents an "ideal partner" for Isilon, and the acquisition opens up "many more possibilities" when it comes to the next-generation of data storage.

Isilon has more than 1,500 customers, including Kodak, Sony, NBC and The Broad Institute. Customers use the company's products to store 3-D graphics, seismic information, DNA sequencing data, audio and video files and more.

During the third quarter, Isilon posted net income of $4 million on revenue of $53.8 million.

EMC hopes to close the acquisition by the end of the year. But the if the deal falls apart, EMC has agreed to a $100 million "break-up fee."

RELATED STORY: "Madrona takes unusual path to financial success with Isilon."

ISILON TIMELINE:

January 2001: Isilon founded in Seattle by Sujal Patel and Paul Mikesell.

May 2001: Madrona and Atlas Venture contribute $7 million in startup funding to Isilon.

March 2002: At the age of 28, Patel raises $15 million from Madrona, Sequoia Capital and others.

September 2003: F5 veteran Steve Goldman named CEO of Isilon. Patel moves to the CTO post.

March 2004: Isilon raises $15.5 million from Lehman Brothers, Sequoia Capital, Atlas Venture and Madrona Venture Group.

May 2005: Isilon raises $20 million in a deal led by Focus Ventures.

December 2006: Isilon's stock debuts on Nasdaq in one of the top IPOs of the year. Company ends first day of trading with a market value of $1.4 billion.

October 2007: Isilon's CEO and CFO resign amid accounting investigation, Patel reclaims the CEO post. Stock tanks.

September 2009: Isilon settles shareholder lawsuit tied to accounting problems. SEC files security fraud charges against former CFO.

February 2010: Isilon posts its first quarterly profit, Patel celebrated for turning the company around.

July 2010: Isilon posts strong second quarter earnings, market value tops $1 billion.

November 2010: Isilon sold to EMC for $2.25 billion.