What’s up with Joyent?

In a world where Amazon(s amzn) Web Services utterly dominates the public cloud discussion and multi-billion-dollar behemoths IBM(s ibm), HP(s hpq) Microsoft(s msft) and VMware(s vmw) are building out massive clouds, where does Joyent fit in? Given its size — employee headcount estimates range from 95 to 200 — it’s pretty small potatoes compared to the rest — not that size is everything, but come on!

The San Francisco company is one of very few privately held cloud providers left standing. Unlike most others, it fields its own technology not — say OpenStack or CloudStack — pretty much from stem to stern. And, by all accounts that technology–the Joyent SmartOS which customers can run in their own data centers, its OS virtualization, its integration of Node.JS into everything, and Manta, its cool object storage service — is solid and is applicable to the whole private/public/hybrid cloud menu.  If you care about such things, it was highly ranked in the Gartner(s it) Magic Quadrant. All of which, you could argue, make it a very fine acquisition target for a bigger company that wants to burnish its cloud credibility.

By all unofficial accounts Joyent is on the block. Of course the company isn’t saying but you would have to wonder if it isn’t for sale, why on earth not. Can standalone Joyent really build a business that can compete with the aforementioned giants? Again, as a private company Joyent does not disclose financials but sources say Joyent revenues are anywhere between $100 million to $200 million. The number depends on who you ask and how much vested interest they have in Joyent. But since the company won’t comment, we have to go with what we have. What we do know officially is that in January,  2012, Joyent snagged $85 million in venture funding from Intel Capital(s intc), Telefonica Digital and others, bringing total venture investment to $115 million.

Bryan Cantrill

Bryan Cantrill, Joyent’s SVP of engineering (center)

Get bought or go it alone

As measured by Gartner, only 3 of the 15 top-ranked cloud providers — Joyent, Virtustream and GoGrid — are privately held. Last week, CenturyLink, a carrier, bought the fourth, Tier 3, for an estimated $200 million. The goal? To bolster CenturyLink’s cloud. Earlier this year IBM bought a fifth, SoftLayer for about $2 billion.

Clearly there’s M&A fever going on. In this high-stakes game, as Rodney Rogers, CEO of Virtustream put it: “When the music stops, you really want a seat to sit in.”  For Joyent, that chair could be long-time partner Dell(s dell). On the one hand,  Dell just finished up a rambunctious $24 billion go-private deal that might mitigate against that. On the other,  there are a lot of Dell alums already at Joyent, including the SVP of sales Steve Tuck. Joyent CEO Henry Wasik was also at Dell, albeit briefly, after Dell bought his company Force 10 Networks. Joyent co-founder and CTO Jason Hoffman left the company  in September.

Other potential buyers include Telefonica, the Spanish telco giant and Intel, the chip kingpin, both of which, as mentioned above, have put money into Joyent via their investment arms. Sources close to Joyent said Cisco(s csco) is also sniffing around.

So conventional wisdom, given Joyent’s strengths and what’ s happening in the market vis a vis privately held cloud providers, is that Joyent is in play big time.

Bryan Cantrill, Joyent’s SVP of engineering says this M&A talk is all academic. In his view, Joyent is just fine on its own — but of course he has to say that. While some liken Joyent to the independent Sun Microsystems — long on tech smarts but perhaps a little too over-engineered for its own good —  Cantrill prefers to compare it to Apple(s appl) “gross profitability aside of course.” I love that “of course.”

“The key is, [like Apple] you can’t be different for difference sake, you need to have a philosophical belief in innovation, not just be different but innovative in connecting what you do with problems people have.”

Joyent’s ace, Manta, promises less schlepping, more computing


We all know that the best technology doesn’t always win: Betamax vs. VHS and all that. But Cantrill thinks the best economics do. And he thinks Manta gives Joyent a big advantage in that Manta processes data where it sits with minimal to-and-fro. In AWS, to process data you typically have to pull it out of S3 storage and into EC2 compute, he said.

Since “Manta runs those processes in situ, you can fundamentally do things that took hours in seconds now. That means you can do so much more with a lot less cost because we bill you based on the nanosecond you execute. In Manta you pay for the compute you actually use — this is a strategic advantage for customers,” he said. That’s a big claim and one that could hold big benefits for some constituencies. Large retailers for example.

Going for retail

Brick-and-mortar stores — all of which pretty much see Amazon as Darth Vader, by the way — need to sift through tons of dense data sources including in-store video. They want to see where the store traffic flows, how many people stop at what display for how long, and whether they end up buying. For that they need to not only store all that data but have infrastructure to run lots of analytics.

“For those jobs, traditional SANs are a non-starter. You cannot be pulling this data from video to an instance and back when you’re talking three years of data,” Cantrill said.

The question is whether Manta, Joyent’s devotion to Node.js and other technology perks can drive a large (and profitable) standalone business or, alternatively, attract top dollar from a buyer. One thing’s for sure, it wants a seat when the music stops.