There's no question that whether EMC or NetApp ends up owning storage deduper Data Domain, the top bidder will have paid far too much for the company. DD's value has tripled artificially in the last 100 days—due strictly to the intense bidding war between the two storage rivals.
It's like an auction for a piece of art in which two determined buyers keep trying to outdo each other while the price keeps moving up and up until the artwork is way, way overvalued. Neither bidder wants to lose face. If EMC had not come into the picture on June 2 after NetApp first announced its intention to buy DD for $25 per share on May 20 (or about $1.5 billion), we wouldn't be writing this blog now.
Since then, EMC came in with a $1.8 billion bid. NetApp raised its offer to $1.9 and got the Data Domain board to agree to it, and EMC—as of July 6—then moved the bar up to $2.1 billion. Who knows where else the numbers will travel.
However, taking a glance at the $6 billion-plus in cash the company has on hand, it looks like EMC's going to be hard to beat. NetApp has a relatively modest $1.5 billion cash in the bank. Data Domain's mostly Santa Clara, Calif.-based employees were probably wincing earlier today when they heard about the latest bid by the EMC because most of them want no part of ownership by the huge East Coast corporation. They'd much rather work side-by-side with their Sunnyvale, Calif., neighbors, the NetApps, and who can blame them?
They hear things from their Palo Alto neighbors, the VMwares—who went through an acquisition by EMC five and half years ago—and worry that those folks all the way back in Boston just don't think the same way laid-back Californians do. EMC, the most successful storage company in the world for the last 10 years, scoffs at this, but it's what they're talking about at the water coolers and in meeting rooms here in the Valley.
Will a victorious EMC face a culture clash if it wins DD? Perhaps. But in the business world, culture often is simply immaterial. One can always find people who will adjust to a new owner. But over time, will DD be the same effective company it has been? The new owner, whoever it is, will be counting on it.
You also can count on one other thing: Culture in business always takes a back seat to the production of bucks. Bottom line.