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 percent.
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 percent 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 process-- Data Domain also put its John Hancock on the earlier NetApp proposal -- it still may not be over. EMC could still come in with a hostile takeover bid and woo Data Domain stockholders over to its side.
Both firms are sweet-talking the stockholders, executives and employees of Data Domain, one indication that EMC may be more serious than the experts believe.
During a late Monday afternoon press conference, EMC CEO Joe Tucci promised that his company would run Data Domain as a product division within EMC, and would increase its R&D investment in Data Domain technology. "We look forward to giving the Data Domain employees a warm and heartfelt welcome into the EMC family. I would like to remind everyone EMC has a good track record of integrating companies, retaining and growing key talent and achieving results," Tucci said. The CEO didn't mention the less-than-stellar integration of VMware Inc. technology into EMC, though to be fair, that acquisition has been a financial success so far.
On the other hand, NetApp does not have a good track record with at least some of its acquisitions, notably the Spinnaker deal in 2003 and the acquisition of Decru Inc. in 2006. Both companies went through a very rocky integration road with NetApp. "I do happen to believe that NetApp does acquisitions miserably," said Arun Taneja, founder and president of the research firm, Taneja Group.
Despite questioning the motives of EMC, many industry observers agree that that company would offer Data Domain a better corporate culture while offering strong sales channels.
On the NetApp side, Data Domain likely wouldn't try to integrate the data Domain products with its own to avoid the problems of past acquisitions. This acquisition could be more successful than past ones because NetApp is expected to better leverage its massive sales and marketing channels to promote the products.
NetApp does face the strong challenge of getting a return on its enormous bid for the de-duplication vendor. To put the deal in perspective, Data Domain's 2008 revenues totaled $274 million, roughly one-seventh the amount of NetApp's latest offer (Data Domain's market capitalization is around $1.99 billion). NetApp's 2008 sales were about $3.3 billion last year, so it's offering more than half its annual revenue for de-duplication technology. By contrast, EMC's 2008 revenue came in at about $14.8 billion.