Analysts Debate Whether NetApp Will Be Acquired

Networking provider Brocade Communications Systems made some headlines and subsequently saw its stock price jump Oct. 5 when it was leaked that it might be up for sale.

That got some people in the data center business thinking again about NetApp, a highly successful storage appliance company that endured a body blow when EMC outbid it to land deduplication specialist Data Domain for $2.3 billion back in July. 

Because of its respected products, services and talent pool, NetApp has been rumored as an acquisition target for one of the large systems vendors for more than a decade. Nonetheless, it has managed to remain steadfast and independent (led mostly by longtime CEO and President Dan Warmenhoven) through a plethora of market and industry changes since its debut in 1992.

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However, the picture finally may be changing. When its new CEO, Tom Georgens, decided not to offer financial guidance to industry analysts a few weeks ago for the current quarter, red flags went up. Uncertainty at the top levels of a company tends to make folks nervous.

It turns out that NetApp really, really wanted to annex Data Domain. That the opportunity was lost weighed a lot on NetApp; it was left hanging unsatisfactorily after that huge corporate effort. That the company changed CEOs shortly thereafter (Georgens for 14-year incumbent Warmenhoven) was another noteworthy move, even though it had been planned for a while.

NetApp still needs an acquisition in a complementary storage sector to help accelerate its growth. The deduplication space—the hottest in the storage business—would still be ideal. A dedupe company that complements NetApp's own brand can attract new business.

eWEEK queried several storage analysts about their takes on NetApp's situation.

"Almost any company can be acquired, and NetApp is no exception," David Hill, principal of The Mesabi Group, said. "Hewlett-Packard might be one company that has an eye on NetApp, but Cisco Systems and Oracle [if the Sun acquisition becomes complete and Oracle has the appetite to expand more broadly into information management] also might be interested.

"However, I don't think that the loss of Data Domain was critical to NetApp. While [it would have been] nice to have had the capabilities that Data Domain brings, Data Domain would have been additive to the bottom line more than a technology that would permeate all that NetApp does."

Stephanie Balaouras of Forrester Research told eWEEK she thinks NetApp is a definite takeover target.

"To be considered a true 'systems' vendor today, you really have to offer the entire IT infrastructure stack and the software to manage it all," Balaouras said. "I'm not sure, however, that it would be HP. HP has made a number of acquisitions recently, including Lefthand Networks, for modular, scale-out iSCSI storage and IBRIX for high-performance computing storage, cloud storage and fixed content archiving—workloads typically satisfied by scale-out NAS or object-oriented storage [which NetApp provides]."