New NetApp Could Rise Fast in the Storage Market

NetApp surprised the data storage market in a big way on May 20 with the announcement that it intends to acquire rival Data Domain for about $1.5 billion.

Funny, we may have had a premonition about this here at eWEEK, and didn't realize it. Storage Station, our storage news blog, had NetApp and Data Domain in the same headline only six days ago, talking about how each company is succeeding in the data deduplication market.

For the record: 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 by generating power to run the hardware.

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NetApp's aggressive deal creates the world market's fifth-largest data storage company, and it's only a percentage point or so behind Dell, at No. 4. 

The new NetApp will be one company that is moving up "with a bullet," as they say in the music business about popularity charts. NetApp is a forward-thinking company with smart management and a happy employee base.

NetApp also was voted the No.1 company to work for in the United States in a recent poll conducted by Fortune Magazine.

"Both companies had been moving up fast, despite some drawbacks," said storage analyst Brian Babineau of Enterprise Strategy Group. "Keep in mind that Data Domain [and NetApp, for that matter] is the antithesis of capacity shipped, because they ship less capacity, and therefore they get less revenue."

Babineau said it's difficult to compare companies like NetApp and Data Domain to the big four systems makers, EMC, Hewlett-Packard, IBM and Dell, which also feature deduplication in their storage arrays but don't play it up quite as much. All these companies certainly are trying to sell as much capacity as they can, but they tend to emphasize different aspects of their products.

Because their arrays are so efficient at finding extraneous data and removing it, NetApp and Data Domain undoubtedly know that being too efficient can actually hamper their own sales to an extent. You don't need to buy as much storage when it works the way it should.

However, that is something the corporate brains at NetApp (hello, Dan Warmenhoven, Tom Georgens and Dave Hitz!) have to deal with.

Another industry insider had an interesting perspective about this deal.

The acquisition "was a surprise to me," Fadi Albatal, director of marketing for FalconStor Software, told eWEEK. "But I have to wonder about something. NetApp claims to have a good first-tier deduplication feature already. The question is: So why'd they go and spend $1.5 billion to buy Data Domain? Doesn't their technology work?"

FalconStor, you should know, is a NetApp competitor, selling both OEM and branded storage arrays. FalconStor, which sells to HP, Sun Microsystems and other top-tier systems companies, is also known throughout the storage industry for its efficient deduplication technology.

Nonetheless, the merger is good for the marketplace, Albatal said, because it validates and publicizes the importance of deduplication as a standard storage feature.

"Looking at the current economic conditions and seeing that $1.5 billion was spent means that the growth potential of the market is validated," Albatal said. "For the industry, it means that consolidation is continuing. It also means that the pie is shared with fewer vendors."