NetApp splashes out $1.5bn to pick up Data Domain

NetApp has put $1.5bn on the table to buy de-duplication specialist Data Domain as consolidation among storage vendors continues unabated.

NetApp has put $1.5bn on the table to buy de-duplication specialist Data Domain as consolidation among storage vendors continues unabated, writes Paul Kunert of Microscope.

Details of the proposed purchase were outlined after NetApp revealed fiscal Q4 revenues of $880m, down 6% year-on-year and an 11.7% increase in profits to $103m, boosted by rises in software and services sales.

Dan Warmenhoven, NetApp CEO, said it planned to operate Data Domain as a separate product line and  management and development organisation when the deal closes in 60 to 120 days.

“We see a lot of cross-sell and up-sell opportunities,” he said, “with less than 6% overlap on our existing storage 5,000 accounts, the combination of our two companies should help us increase penetration within our customer base”.

The similar nature of the product models – both have a software solution wrapped around standard commodity components – would speed and smooth the transition, said Warmenhoven.

In a statement, Frank Slootman, CEO at Data Domain, said NetApp’s distribution channel and customer base would accelerate sales.

The companies were unable to make additional comments before the deal closes.

During NetApp’s final three months of fiscal 2009, product revenues fell 20% year-on-year to $506m, while software and services sales went up 21% and 22% respectively to $165m and $210m.

Steve Gomo, CFO at the firm said it had seen a “marked increase” in the number of one year renewals of software entitlements and services maintenance contracts.

“Many customers looked to defer capital purchases and extend the life of their current systems during the economic downturn and as a result current period purchases of systems slowed,” he said.

The firm said the restructuring plans announced at the beginning of Q4 were “tracking to our expectations”. The number of employees fell by 407 in the quarter to 7,976 worldwide.

Despite the bold move to buy Data Domain and improving signs in the market - based on sequential increases in revenues and resurgence in mid-range and enterprise accounts - the company was less daring on its forthcoming Q1.

“Given the limited visibility that persists in the macro environment we will not provide revenue guidance for the first [fiscal] quarter,” said Gomo.

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