NetApp Buys Data Domain for $1.5B

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In a major deal for the storage sector, NetApp (NTAP) announced after the bell that it will buy Data Domain (DDUP) for $25 a share in cash and stock, or about $1.5 billion. Shares of Data Domain closed today at $17.93, so the deal price represents a hefty premium for investors.

The deal highlights the growing importance of deduplication, which saves space on storage devices by eliminating duplicate copies of the same file or data. Data Domain has emerged as a leading player in deduplication and the shift from tape storage to disk-based backup. Data Domain systems identify redundant files and data as they are being stored, creating a storage footprint that can be 10 to 30 times smaller than the original dataset. NetApp offers deduplication in its virtual tape library (VTL), disk-based systems.    

“This combination is a great opportunity for both NetApp and Data Domain,” said Dan Warmenhoven, chairman and CEO of NetApp. “Data Domain is an innovative high-growth company with a complementary product line ideally suited for multi-vendor environments where customers want to minimize their use of tape for backup.”

NetApp said it intends to operate Data Domain as a product line within NetApp’s product operations organization. The Data Domain sales organization will be integrated with NetApp sales to maximize momentum and access new accounts.

NetApp has itself been the focus of acquisition rumors. But Warmenhoven told Bloomberg News that reports of an “impending acquisition are greatly exaggerated.”

“Anyone who wants to make a big enough offer could probably acquire us,” Warmenhoven said. “They’re not coming to the table. Personally, I think it’s a very, very low probability anyone would make an offer to acquire NetApp.”

About the Author

Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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  1. At first glance, NetApp may now appear to have “duplicate” products since it already offers a free de-duplication solution. But, the dynamics of the marketplace make the arranged marriage of NTAP and Data Domain a must. The reality is threefold: (1) NTAP continues to struggle to penetrate Fortune 50 accounts and requires more product differentiation. Channel checks by Primary Global Research (PGR) indicate that NTAP’s traditional ease-of-use value proposition does not overcome aggressive pricing tactics from EMC. And NTAP’s existing de-dup offering was not helping NTAP to win market share; (2) DDUP’s upcoming primary storage de-duplication offering designed to overcome network traffic problems was not anticipated to perform particularly well. Hence, the company needed the cover of a player that already had decent primary storage device; and (3) The synergy between NTAP and DDUP may help NTAP achieve upside in broad-based storage sales in a manner comparable to IBM’s de-dup acquisition of Diligent. At PGR we believe NTAP had to double down on DDUP just to stay in the game. Unni Narayanan, Ph.D. CEO and President Primary Global Research, LLC