NetApp responds to EMC's bid for Data Domain

June 3, 2009 -- The bidding war for Data Domain has begun. NetApp has responded to EMC's surprise offer to buy the company by upping its offer to $1.9 billion and claiming that a combined NetApp-Data Domain has a bigger upside for both companies.

NetApp issued a revised offer this morning, raising the acquisition price to approximately $1.9 billion versus EMC's $1.8 billion offer earlier this week.

In a press release, NetApp's chairman and CEO, Dan Warmenhoven, said his company's "strategic rationale remains the same" and "the complementary nature of the Data Domain and NetApp product lines will result in higher aggregate growth compared to the redundancies that would result with the EMC product line."

Warmenhoven added, "The cultural compatibility between Data Domain and NetApp will maximize the potential for continued innovation from a creative and motivated employee base. This will not only create a meaningful choice for our customers but also lead to a complementary combination with no obstacles to an expeditious close of the acquisition. Therefore, we are as committed to this partnership now as we were when we first announced our intent to acquire Data Domain."

Mum's the word over at Data Domain as they company has yet to comment on the EMC-NetApp tug of war. The industry pundits, however, are keeping a close eye on the back and forth.

Enterprise Strategy Group analyst Lauren Whitehouse wonders whether EMC is just playing the spoiler, especially given its wealth of data deduplication technologies and OEM deals.

"I am having a hard time understanding why EMC wants the Data Domain technology. EMC has deduplication solutions through the Avamar product and its partnership with Quantum. I'm not sure what opportunities there are for technology integration with Avamar and EMC recently made a sizeable investment in Quantum," said Whitehouse. "The company has also promoted the benefits of the being able to replicate between Dell, EMC and Quantum solutions. What statement is EMC making about its investments in Avamar and Quantum by bidding for Data Domain?"

She continued, "Who can better leverage and integrate the Data Domain technology? EMC definitely has a better track record of doing acquisitions and leveraging technology purchases. Without really knowing the motivation for either company's bid, it's hard to judge who will leverage the technology better. It's just not obvious what the intentions are for either bidder. What a rollercoaster ride this has been."

David Vellante, co-founder and contributor to The Wikibon Project, believes EMC may have the edge.

"EMC plays for keeps. It doesn't mess around when it comes to competing. I think if EMC really wants Data Domain it will outbid NetApp for sure," he said.

So what does EMC's unsolicited bid for Data Domain say to the industry? Vellante sees it as a defensive move by EMC.

"It says to me that EMC recognizes it can't grow its core storage business organically and needs to acquire growth," Vellante said. "It says EMC is making a defensive move, albeit an aggressive one, to stop Data Domain from getting in NetApp's hands."

He also believes smaller vendors are fast becoming hot commodities.

"The market is continuing to consolidate and companies like CommVault, FalconStor, Sepaton and even 3PAR and Compellent are worth more today than they were yesterday," Vellante said.