In an industry where bidding wars come around about as often as leap years, the battle between storage rivals NetApp Inc. and EMC Corp. over Data Domain Inc. is indeed a very unusual phenomenon. Even more so because -- unlike most major league baseball stars -- Data Domain isn't likely to choose the winning bidder based on money alone.
Many industry observers believe EMC isn't all that interested in Data Domain and instead began a bidding battle to force its nemesis NetApp to raise its offer for the de-duplication vendor. If they are right, the plan has worked brilliantly -- NetApp was forced to boost its initial offer by $400 million after EMC upped the ante with its $1.8 billion bid early this week. But that's a lot of cash to be swinging around for spite's sake.
"My first take was 'oh, that is really smart,'" said former EMC employee Steve Duplessie, founder and senior analyst at the Enterprise Strategy Group in Milford, Mass. "And, even if NetApp wins, they'll probably have to accept the all-cash variant. For NetApp, this is 'Texas Hold 'Em.' But EMC is big enough where they could screw it up, and it would be bad, but they'd survive."
In fact, EMC does not need Data Domain. EMC already sells re-branded data de-duplication technology targeted at the Data Domain's backup process market. And it has the resources to buy any of several smaller, less expensive and mature de-duplication vendors, such as FalconStor, Sepaton or Permabit. It could even buy the much larger Quantum Corp. for its de-duplication technology and then sell off what it doesn't want, much like it did after buying Data General Corp.
"Everybody's got de-dupe. Everybody. I think I have a de-dupe technology," Duplessie joked. "So there's obviously both emotion and bravado involved at this point. But it also has to be 'I'm scared of the other guy having it' as much as it is 'I want it.' "
Nonetheless, if EMC does buy Data Domain, the acquired products wouldn't go to waste. Duplessie pointed out that many are ideal to be sold through the midrange sales channel via EMC partner Dell Inc. Currently, only EMC's Clariion product line moves through that massive Dell channel, which accounts for more than a tenth of EMC's revenue, even though it is waning a bit. So EMC could leverage its partnership with Dell in a new and dynamic way.
An EMC acquisition would probably force the company to discontinue reseller partnerships with FalconStor and Quantum, through which it offers two virtual tape libraries and an archive disk array, even though EMC CEO Joe Tucci said last week the agreements would remain in place. You don't spend $2 billion on an acquisition and continue to sell duplicate technology -- if nothing else de-duplication teaches you that.
There's no doubt Data Domain wants a marriage to any sugar daddy to be a healthy one where its talented employees are retained and there's a strong expansion of the marketing and development of its products. Clearly, both NetApp and EMC offer that, so choosing between the two must go beyond the pocketbook.
So far at least, the battle for Santa Clara, Calif.-based Data Domain hasn't exactly hurt its stock price, which has just about doubled to $33 a share, since NetApp's initial offer last month. In June alone, the stock has risen by 24%.
When NetApp started the de-dupe duke out, many observers thought its eye-popping $1.5 billion cash and stock offer wouldn't be topped. But less than two weeks later, Hopkinton, Mass.-based storage giant EMC showed up like an unwelcome relative at the party with $1.8 billion in cash -- 20% more than the NetApp proposal. On Wednesday, an insecure NetApp fired back with a $1.9 billion cash and stock bid, and Data Domain quickly accepted it. But based on the history of the
Post new comment