UPDATE EMC bids for Data Domain

EMC has made a bid for Data Domain, outbidding NetApp by 20% and says the reason for the bid is the chance to dominate deduplication in remote offices and for primary backups.

EMC today made a bid to acquire data de-duplication specialist Data Domain, which rival NetApp announced it intended to acquire on May 20th.

EMC announced its bid today at 6:15 AM ANZ time and has offered $US1.8 billion. The company says its offer trumps NetApp's by 20%.

EMC CEO Joe Tucci issued a statement that said "Strategically, this combination will further enhance our ability to broaden EMC's best-in-class storage portfolio for the benefit of EMC and Data Domain customers and this, in turn, will accelerate EMC's top-and bottom-line growth rates. Our substantially superior proposal is a win-win for both companies."

 "The combination of EMC and Data Domain technologies will strengthen EMC's leadership in the fast-growing and very important next- generation disk-based backup and archive market, and will also result in a business larger than a billion dollars for EMC in 2010. We expect the transaction with Data Domain to be accretive to EMC's 2010 non-GAAP diluted earnings per share."

The statement also said that "EMC has made this offer to acquire Data Domain for its fast-growing revenue base, its strong data protection-focused management team and sales force and its highly complementary storage software technology that will help to accelerate both companies' ability to deliver industry-leading next-generation disk-based backup and archiving solutions for customers."

The EMC board has unanimously signed off on the proposed acquisition.

Early reaction to the announcement  is negative, with Enterprise Strategy Group Analyst Steve Duplessie writing "I see absolutely nothing logical in the move."

EMC has since blogged about the proposed acquisition. Chuck Hollis, the company's VP and Global Marketing CTO writing that "EMC continues to show the courage of its convictions by investing in widening its current strategic lead in the storage marketplace."

5:00PM update from SearchStorage USA's Dave Raffo

EMC CEO Joe Tucci spoke about the bid for Data Domain on a conference call today and said EMC's goal is to corner the market on dedupe by having the market leaders for both types of backup and archiving dedupe. Data Domain's appliances are used for centralised backup, while Avamar is primarily used to backup data at remote offices and on laptop and desktop PCs.

"The company that figures out how to do source and target together is going to be a big winner," Tucci said . "By combining them and eventually having the source flow to target, you can really get to next generation of backup and archive."

EMC currently licenses Quantum's deduplication software on EMC Disk Library (EDL) hardware and has done so for about a year, but obviously considers Data Domain's deduplication superior to Quantum's.

Tucci said EMC would continue the EDL 4000 and add a bigger version, and he forecasts the combination of the Data Domain, Avamar, and EDL products to bring in $US1 billion in revenue in 2010. "The DL 4000 is the largest product out there, and a kind of father for that is coming, which is bigger," he said. "We think we can make a nice family out of this."

He also said EMC would cooperate on development with other backup software vendors if it acquires Data Domain. Data Domain's products work with all backup software, and it has a tight working relationship with Symantec, chief competitor to EMC's NetWorker and Avamar backup products.

Like NetApp, EMC is proposing to keep Data Domain's management and make it a product division. But Tucci says EMC brings a larger global sales force, more development resources and a superior track record with acquisitions than NetApp can offer.

"Look at our track record of integrating teams and meeting targets [after acquisitions]," he said. "I'll match that up against NetApp's any day."

NetApp still has one thing EMC doesn't – Data Domain's consent to the deal. Tucci sent a message to Data Domain employees during his Monday conference call – "I believe you'll love it here" – but says NetApp's pending deal has prevented him from talking directly to Data Domain management.

He denied EMC was making a defensive move to stop NetApp from getting Data Domain, but added "we've had our eye on Data Domain for some time. Obviously, somebody moved before we did." .

Tucci also held out the possibility that Data Domain's technology could be used outside the backup and archiving realms for some primary production workloads, although "I'm sure I'll be long retired before this will work on high-volume transaction processing workloads."

An EMC-Data Domain acquisition would be bad news for Quantum, which counts heavily on its OEM deal with EMC for dedupe revenue as well as its own hardware virtual tape library platform. Dell last year said it would also sell Quantum dedupe, but has yet to launch any products and Friday is expected to announce an extension of its OEM deal with CommVault for its Simpana software with dedupe.

Tucci said "we will continue our relationship with Quantum" -- although that would likely be limited to its reselling of Quantum's tape if EMC buys Data Domain.

"This was a technology we wanted to own," he said of Data Domain. "We needed to own the target code base and product."

Data Domain declined comment on EMC's offer, and NetApp did not respond to a request to comment by press time.

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