EMC, NetApp, Data Domain Triangle Takes Another Turn

By Chris Preimesberger  |  Posted 2009-06-03 Print this article Print

Data Domain's board accepts NetApp's revised offer at $1.9 billion, but EMC, the world's largest storage infrastructure supplier, is still trying to break up the deal. EMC is attempting a hostile-bid takeover with its June 1 bid of $1.8 billion in cash.

The "love triangle" involving data storage competitors NetApp and EMC and the object of their affections, storage systems and deduplication provider Data Domain, took a second turn June 3 when the Data Domain board of directors unanimously accepted a revised $1.9 acquisition offer from NetApp that it had received earlier in the day.

However, EMC, the world's largest storage infrastructure supplier, is trying to break up the corporate nuptials by attempting a hostile-bid takeover with its June 1 bid amounting to $1.8 billion in cash, eclipsing NetApp's original May 20 offer of $1.5 billion in cash and stock.

EMC is an aggressive, acquisition-oriented company with a great deal of cash and liquid assets that is accustomed to getting what it wants, so it is possible that the bidding war is not over. EMC has taken over about 50 storage- and security-related companies in the last six years.

In response to the day's two developments, EMC spokesperson Michael Gallant referred eWEEK to EMC President, CEO and Chairman Joe Tucci's statement released June 1 with the $1.8 billion offer.

"EMC's all-cash tender offer remains superior to NetApp's proposed part-stock merger transaction. We are proceeding with our superior cash tender offer, which is not subject to any financing or due diligence contingency," Tucci wrote. "We do not believe that the Data Domain stockholders will approve the merger transaction with NetApp."

If its revised agreement with Data Domain does become final, NetApp will acquire all of the outstanding shares of Data Domain's common stock for $30 per share in cash and stock. The deal is expected to close in 60 to 110 days, NetApp said.

All three companies in this financial drama are well known in the storage industry for their utilization of data deduplication features. Data deduplication eliminates redundant data from a disk storage device in order to lower storage space requirements, which in turn lowers data center power and cooling costs and lessens the amount of carbon dioxide produced to generate power to run the hardware.

NetApp + Data Domain = No. 5 Storage Company

A combination of NetApp and neighboring Data Domain would create the market's fifth-largest data storage company, ranking only behind EMC, Hewlett-Packard, IBM and Dell. EMC obviously does not want that to happen.

"We just think the combination of NetApp and Data Domain is better for a lot of constituencies-customers, shareholder[s] and partners-than EMC-Data Domain," Jay Kidd, chief marketing officer of NetApp, told eWEEK.

"What we're seeing is customers buying primary storage and backup storage; deduplication is not a market in and of itself," Kidd said. "Dedupe is becoming more prevalent, especially in backup storage-most of the VTL [virtual tape library] offerings feature that now. But in primary storage, it's still quite unique."

NetApp prides itself on its primary disk storage deduplication and sees the addition of Data Domain as a way to greatly enhance its product line and its market share.

Huge Turnaround in Stock Value

No matter which company makes the acquisition, Data Domain shareholders have to be very pleased with the sudden turnaround in their stock. On March 16, Data Domain was selling for $10.24. It closed at $32.54 on June 3.

"The synergies between our two companies will enable us to accelerate growth and market adoption, more so than as separate entities," said Dan Warmenhoven, chairman and CEO of NetApp. "This partnership will create meaningful benefits for our global customers."

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on Salesforce.com and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and DevX.com and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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