In this blog I look beyond the obvious and try to find out why people and companies do what they do - and what it means for the rest of us. 
More to follow, but EMC just bid $30/share – or $1.8B for Data Domain. I see absolutely nothing logical in the move, and if I were NetApp, I would look at this as the world's best Mulligan.
EMC has 19 dedupe solutions already, owns Quantum practically, and ALREADY sells more target based backup systems than DD. Why on earth would they want to pay that much for another version of a feature – that won't support the only place they should be trying to play: the HIGH END?
Had they announced that they bought Sepaton for $400M or so, I would have said OK, good move. But this? This was nuts when NetApp was doing it at $1.5b. It seems super-nuts now.
The only possible play I can make semi-sense of is that they really didn't want NetApp to have it, because NetApp's only hope of making the deal make sense was to run very fast and very hard to dominate the global landscape with the DD stuff. That, in my opinion, was a long shot. This, in my opinion, is irrational.
Is there ANYONE that thinks the DD stuff is so far superior to the other 800 ways to do dedupe these days that it's a fait acompli that the world is going to demand DD branded dedupe? I know it's good, but that good? The market already had DD overvalued from a pure earnings multiple perspective, and customer growth rates weren't all that impressive. So you double the cap??
I'm scratching my head at this point – but, maybe EMC is trying to get NetApp to spend even more than they wanted – their cash position is no where near EMC's, so maybe they are super-smart and trying to get NetApp to spend $2B – which will be a huge blow to their cash position. I doubt it, but that would be cool.
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Maybe it says something about the underlying strengths of EMC & NetApp’s businesses that they are so desperate to own DataDomain.
I asked a friend of mine about this. who knows both companies well, and his response was, “EMC don’t play, you know that.”
I think that whoever wins (and this is my personal opinion, not that of CommVault), that it’ll be race against time.
Either company will need to extract out revenue from the acquisition faster than the dedupe market evolves and commoditizes.
It was a rich deal at $1.5B, but at $2B it feels positively giddy. You many be right though that forcing NetApp to spend $2B in cash enables them to drain NetApp’s own cash pile. That makes more sense. “Lose” to the other guy, and leave them with little extra cash to make other strategic acquisition, survive a price war, etc.
“Why on earth would they want to pay that much for another version of a feature”.
Maybe because they realize that DataDomain is the only one having a deduplication solution that really works!
Money sitting in the bank is losing value all the time. Interest rates are terrible, the dollar is plummeting and real inflation is horrendous (and many companies are preparing themselves for even higher inflation). People and companies with cash are trying desperately to get out of it and into any other asset class. This may help to explain the rationale for this deal.
What makes it more interesting to watch is that EMC owns 400 of the 800 ways to dedupe. NetApp’s Dedupe only scaled to 16tb, so it made some sort of sense for their bid… but DD’s only scales to around 30TB, so actually, not that much sense. Unless they are targetting the mid tier with it, which likely, they are. IMHO, EMC is purely trying to stop NTAP from buyuing it.
Maybe a weird Freudian employee re-retention policy. Since a number of senior people seem to have left NetApp for DD and they would presumably be locked up for a while after an acquisition …
—I don’t think there can be a lockup unless there is additional compensation involved – this is a public company, so it’s not the same as when you buy a private entity I think. Regardless, there are a bunch of NetApp folks and a bunch of EMC folks inside of DD, each probably hoping that the other guy wins. There is probably a reason they aren’t still at their former company!
How great would that be? You leave EMC/NetApp after a fiery blowout with your boss, leave a dog turd in his filing cabinet, and two months later he owns you again!!!! Steve
Steve, HP seems left out in the cold, Symantec needs to be a player and maybe less committed to a software only model than people think, Dell has $11 bill in cash including what they raised today (see the WSJ article today where Darren Thomas, head of storage,was quoted as saying they are looking for acquisitions in storage. No one has really mentioned Oracle in all of this but clearly if Falconstor were so good wouldn’t Sun have been more competitive in dedupe? What I am saying is that the Netapp, EMC competition for DDUP could be the catalyst for the “orphans” out there to get adopted. One theory is that Netapp will bring HP in to help finance their bid for DDUP…that would be interesting.