Data Domain Prices $78M IPO

De-duplication specialist Data Domain is looking to raise around $78 million from an IPO later this year, according to documents filed late last week with the SEC.

An amendment to the startup's S-1 reveals that the vendor will offer just under 7.4 million shares, priced at between $11.50 and $13.50.

Data Domain was expected to raise around $100 million with its IPO, although the vendor is now targeting a midpoint pricing range of $12.50 to raise $77.9 million. If the IPO's underwriters, which include Goldman Sachs and Morgan Stanley, exercise options to purchase additional shares, this figure could rise to $90.8 million.

A note explains that Data Domain plans to use the offering's proceeds "for working capital and other general corporate purposes." M&A is also cited as a possibility, although the vendor does not have "agreements or commitments for any specific acquisitions at this time."

The filing reveals that the Santa Clara, Calif.-based firm will eventually trade under the Nasdaq symbol DDUP, and it only gives the calendar year 2007 as the likely date for the IPO.The startup has been slowly adding flesh to the bones of its IPO strategy over the last few months, recently inking a deal with Quantum to avoid de-duplication lawsuits. (See De-Dupe Vendors Shake Hands and Storage Bubble Wrap.)

Data Domain filed its initial S-1 with the SEC in late March, although this did not include the number of shares to be sold, or the projected price range. (See Data Domain Files S1.)

The updated S-1 also reveals that Data Domain brought in revenues of just over $20 million for the first three months of 2007, up from around $8 million in the same period last year. Despite this revenue hike, the vendor's operating losses widened in the intervening 12 months, from $816,000 in the first quarter of 2006 to just under $1.5 million in the first three months of this year.

A note in the filing acknowledges that the vendor, which started life in 2001, has not yet achieved profitability. In 2006, Data Domain suffered a loss of just over $4 million, although this was a significant improvement on the previous year's figure of $13.8 million. At the end of March 2007, the vendor's accumulated deficit was $38.1 million.

At least Data Domain appears to be racking up a solid customer base. At the end of the first quarter this year, the vendor's technology had been deployed in 750 enterprises around the world, and the startup had clinched deals with over 100 channel partners, according to the amended S-1.Data de-duplication has been cited by users as one of this year's hottest technologies, with IT managers and CIOs looking to reduce the bulk of backed-up data. (See Top Storage Predictions for 2007, 2006 Storage Winners & Losers , and The Year of Data Protection.) A number of vendors are currently fleshing out their de-dupe strategies, including EMC, which spent $165 million on Avamar last year, Sepaton, and early mover Diligent. (See EMC Picks Up Avamar, Symantec Dips Into De-Dupe, Diligent Breaks Record, and Diligent Unveils SME Solutions.)

In such a congested corner of the market, Data Domain needs to be careful how it spends its IPO money, warns IDC analyst Laura DuBois. "They need to use the cash that they get from the IPO to invest more in sales and marketing," she says. "They have got heavy competition from NetApp and EMC."

Data Domain is the latest in a string of storage vendors to bust an IPO move over the last 12 months. Data warehousing specialist Netezza, for example, filed its own S-1 earlier this year, following in the footsteps of Mellanox, Isilon, Double-Take, Riverbed, and CommVault. (See Netezza Nudges IPO, Riverbed Comes Out at $9.75, and CommVault Swims in Public Pool.) More recently, virtualization behemoth VMware has edged closer to its own public offering, and IPO talk continues to swirl around Voltaire and Force10. (See VMware Closer to IPO, VMware Files With SEC, Voltaire Nabs Cash Amid Speculation, and Force10 Round Hits $113M .)

James Rogers, Senior Editor Byte and Switch