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Cloudera and Hortonworks have been symbolic of the “big data” era as two of the most successful companies built around the Hadoop open-source project, but apparently this market isn’t big enough for the both of them.

The two companies announced Wednesday that they have agreed to a “all-stock merger of equals,” which is the nice thing to say when things like this happen but which was immediately contradicted by the details of the transaction. Cloudera stockholders will own 60 percent of the combined company, control five of the nine board seats, and Cloudera CEO Tom Reilly plans to run the combined Bay Area company.

Hortonworks CEO Rob Bearden will join the board of directors of the new operation but will step down from an operational role after the expected close of the deal in the first quarter of 2019. Hortonworks Chief Operating Officer Scott Davidson will assume the same role at the combined company, and several other top executives from both companies will remain on board, including Hortonworks Chief Product Officer Arun Murthy.

“Together, our highly complementary companies will create an industry standard leader for modern data management,” Reilly said on a conference call with financial analysts after the announcement of the deal. While both companies provide data analysis products based on Hadoop, Hortonworks invested heavily in capabilities for Internet of Things applications while Cloudera focused on machine-learning applications, and the companies believe the combination of the two gives customers a much broader approach to the changing nature of data generation and analysis.

Cloudera CEO Tom Reilly (Cloudera Photo)

Cloudera and Hortonworks rose to prominence as commercial providers of software and services based around the Hadoop big-data open-source project, which took off in the earlier part of the decade as the preferred method for performing data analysis on extremely large sets of data. Hortonworks went public in 2014, while Cloudera (backed by Seattle’s Ignition Partners) followed last year, and the combined company will be worth $5.2 billion based on Tuesday’s closing prices.

The combined company will have $720 million in yearly revenue and 2,500 customers, although neither company has recorded a profit to date, which was likely the impetus for the merger. The release announcing the merger made sure to note “more than $125 million in annual cost synergies” will result from the combined operation, and that usually translates to significant layoffs.

The nature of this market has also changed thanks to growing adoption of cloud computing, which provides other data analysis options that were designed for the cloud era, unlike Hadoop. Hadoop was developed first at Google and then refined at Yahoo as the underpinning of each company’s search technologies, and played a key role in the development of data analysis as a competitive advantage among large enterprise computing customers looking for an edge on their rivals.

But Reilly thinks the combined company (which will apparently be named at a later date) will be able to take advantage of the trend toward hybrid cloud deployments. It will be a more attractive partner for cloud companies like Amazon Web Services and Microsoft Azure than either company was on its own, and the combined company will have the on-premises expertise that younger cloud-native companies lack, he said.

That’s important, because AWS and the other cloud companies offer managed Hadoop services that Reilly acknowledged compete with both Cloudera and Hortonworks. The existing customer base of the two companies is behind the curve when it comes to adopting cloud computing, and Reilly thinks that potential customer base will be attractive to the cloud vendors.

At some point after the deal closes, the combined company’s engineers will work together to product a “unity release” that will pick the best aspects of each other’s products and give existing customers a migration path that preserves older investments, Reilly said.

[Editor’s note: This post was updated several times as more information became available.]

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