# Holy Mozy, EMC Moves In. There Goes The Neighborhood

[qi:011] With every new technology, innovation generates excitement, the excitement turns into buzz and the buzz, more often than not, gives way to a buyout in which a buyer overpays for a hot new startup — and triggers a slow deflation in the valuations of the startup’s competitors.

Cisco Systems (CSCO) spent lavishly for Cerent, eBay (EBAY) opened its checkbook for Skype, and Google (GOOG) ponied up for YouTube. Now EMC Corp. (EMC) has reportedly bought American Fork, Utah-based Berkeley Data Systems, the company behind online backup service provider Mozy, for $76 million. BDS had raised about$1.9 million in venture backing, and as of April counted some 180,000 users of the Mozy backup service. Reviews of the service — including one in our own Web Worker Daily — have been positive across the board.

The acquisition by EMC is a surprise, though as Jeff Clavier explained on our show earlier this week, it is the non-conventional buyers (in other words, not Google, Microsoft or Yahoo) that are giving web 2.0 mergers and acquisitions a nice nudge.

The rationale behind EMC buying Mozy is still unclear, however. But one suspects that it would be a key component to them going after small- and medium-sized businesses, much as SoonR is doing by shifting its focus to backup-and-restore features. And although the $76 million sticker price does seem rich, EMC can afford to be lavish: it’s sitting on a windfall generated by the VMWare (VMW) IPO. Valuations of VoIP providers haven’t been the same since eBay’s momentary loss of rationale, and while a shakeout in online video hasn’t exactly come to pass, there is little chance of someone cutting another$1.6 billion check anytime soon. For optical hardware startups, the Cerent buyout was a top, as was the case with another Cisco purchase, Stratacom.

From that perspective, the \$76 million buyout of Mozy should be a warning signal for dozens of online storage startups that are trying to get our attention. Perhaps it is time for them to start accepting whatever offers they can get — fast.

PS: If you are aware of academic studies about big buyouts and the after-market impact on competitors, do let me know.