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NetApp Seeks Growth With Acquisition of Data Domain

On a day it reported a decline in quarterly profit and sales, NetApp said it would try to rekindle growth by spending around $1.5 billion to buy Data Domain, a leading vendor of backup systems that use data deduplication technology to reduce storage needs.

NetApp said it will pay $25 in cash and stock for each share of Data Domain, which is a 40 percent premium to where the company's stock was before the news was announced. Bloomberg reported that Data Domain stock holders will receive $11.45 in cash and 0.75 of a NetApp share.

The move is part of an ongoing consolidation trend in the storage industry and among data center vendors. Server, networking and storage vendors companies are looking to fill in their product portfolios in order to offer a more comprehensive set of systems and gain more revenue from each customer.

NetApp may have felt it needed to do something to get back on a growth trajectory. In the quarter ending April 24, NetApp said Wednesday it had net income of $75.1 million, or 23 cents a share, compared to earnings of $89.8 million, or 26 cents a share, in the same quarter a year ago. Adjusted earnings were 31 cents per share in the latest quarter. Revenue fell to $879.6 million from $937.7 million.

Data Domain, in contrast, doubled its revenue in 2008 to $274 million and reported net income of $21.6 million, compared to a loss of $3.7 million a year earlier.

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