EMC, NetApp Launch Data Domain Bidding War

EMC (NYSE: EMC) and NetApp (NASDAQ: NTAP) have launched a good old-fashioned bidding war over upstart Data Domain (NASDAQ: DDUP).

Data Domain makes data deduplication technology, which eliminates duplicate data, saving users a bundle on storage and bandwidth costs. Not surprisingly, it’s been one of the hottest storage technologies in the tough economy, and as the company that pioneered it, Data Domain has benefited as much if not more than anyone.

Hence the bidding frenzy that has developed over the last two weeks.

NetApp got the ball rolling with a $1.5 billion offer for the company, which EMC raised to about $1.8 million, or $30 a share, on Monday, which seems like a lot of money for a company with $300 million in sales and an expected 30 percent growth rate.

NetApp matched that offer this morning, and late today, Data Domain issued a statement accepting NetApp’s new offer. EMC countered with a statement that its all-cash bid is superior to NetApp’s cash-and-stock offer and that it will continue with its tender offer for the company.

So how will the standoff be settled? Some analysts think NetApp may have the upper hand, as it already owns more than 20 percent of Data Domain.

Enterprise Strategy Group analyst Brian Babineau said Data Domain shareholders could be in for a lengthy proxy and legal battle — or NetApp could “raise the bid to be truly superior.”

One company with a lot at stake in the outcome is EMC dedupe partner Quantum (NYSE: QTM). Analysts believe that an EMC-Data Domain combination would leave little room for Quantum. And if EMC fails in its bid to acquire Data Domain, it would need to reassure customers that it remains confident in its current dedupe product lineup. NetApp, meanwhile, has been working on its own dedupe technology, but clearly covets Data Domain’s technology — and market share.

“If EMC wins, what happens to their Quantum relationship?” wondered Babineau. “What is NetApp’s response? And if NetApp wins, does EMC just go back to Avamar and its Quantum relationship for their VTL?”

Babineau said EMC could also win if NetApp is forced to overpay for Data Domain.

“EMC really is the winner,” he said. “They win if they get Data Domain, and they win if NetApp is bleeding at the end.”

Article courtesy of Enterprise Storage Forum

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