EMC Outbids Rival NetApp For Data Domain

EMC has offered to acquire all of Data Domain's outstanding stock at $33.50 per share, or approximately 2.1 billion dollars. EMC has removed restrictions to the deal, urging Data Domain to do the same and wants to close in 2 weeks. The offer expires on July 17th.

In a letter to Data Domain's Board, EMC highlights three points in EMC's offer--the price is greater than NetApps, the deal can be closed quicker than NetApps, and the all cash acquisition isn't as variable as a part stock swap. On June 15th, Data Domain rejected EMC's $30.00 per share offer due to uncertainties tied to the offer such as the possibility of paying $57 million dollar termination fee to NetApp which wouldn't be recovered if the EMC deal fell through. It appears those uncertainties have been resolved. Ironically, NetApp also announced today that they have leapt the SEC and FTC regulatory hurdles and are clear to finalize the deal.

This is a rather interesting battle over a what many have called a feature of storage--de-duplication. Granted, de-duplication has many benefits beyond just saving on storage media. More organizations are, or are considering about using network back-ups over the WAN to improve disaster recovery plans. Additionally, the rise in virtualization and the ability to house applications and data in multiple data centers puts more pressure on maximizing WAN transfer speeds and reducing utilization.

The big question is what does EMC or NetApp get from Data Domain? Both suitors have de-duplication facilities already--EMC from it's acquisition of Avamar and NetApp A-SIS. Deni Connor, Principle Analyst, Storage Strategies Now, notes that the fight over Data Domain "validates that de-duplication is a feature of a storage product, rather than a product line. De-dupliation is a must have  in any storage strategy."

For either EMC or NetApp, Data domain, which Connor characterizes as the leader in storage de-duplication, gives the acquiring company in-roads to customers and gets mind share among storage and IT professionals--mind share that is expensive and time consuming to develop. NetApp, as Byte and Switch Blogger Howard Marks points out, "is known as a NAS vendor. No body thinks of NetApp as a block storage vendor. Data Domain lets NetApp tell that story to a new set of customers, the SMB, used to buying storage from their server vendors."On June 3rd, David Vellante, co-founder and principal contributor to Wikibon.org a professional community of IT practitioners, said "What is still unclear is how badly EMC wants Data Domain.  They may just be forcing a higher price on NetApp since it is clear that EMC can outbid NetApp if it wants to." Increasing offers shows EMC is committed and the all cash deal versus NetApps cash +stock may indicate NetApp can't go higher. Connor thinks Sepaton or CommVault, if the EMC and NetApp are truly committed to bolstering their de-de-duplication technologies, are good alternatives while Marks favors Quantum with some R&D dollars thrown in.