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Has EMC rustled Data Domain away from NetApp, HP and Cisco?

By Brad Reese on Tue, 06/02/09 - 7:04am.

It appears that EMC has successfully "rustled away" Data Domain from not only NetApp, but perhaps HP and Cisco too.

How so?

Well, EMC offered this week $300 million more than NetApp to acquire deduplication storage solutions vendor Data Domain. Additionally, EMC's all cash deal has no finance or due diligence contingencies because it's using existing cash to launch an immediate tender offer for Data Domain stock, giving EMC the formidable competitive advantage of speed on top of its premium offer.

It also appears that timing is everything, especially since HP's new storage star - former longtime EMC executive David Donatelli, conveniently has had his "storage hands" successfully cuffed by EMC's non-compete court victory for perhaps the entire upcoming year.

Meanwhile, Cisco lost almost 10 percentage points in overall SAN market share in Q109 according to The Dell'Oro Group and Cisco's acquisition strategy appears no longer focused (in my opinion) on adding value for its channel partners.

Overview of the EMC Offer for Data Domain:

EMC proposal to acquire Data Domain
The Opportunity
Source and Target Backup and Archive
Backup and Archive Use Cases
EMC Next Generation Backup Solutions
Benefits for EMC
Benefits for Data Domain
Benefits for Customers and Partners
Summary

Related story:

EMC aims to beat out NetApp with $1.8B bid for Data Domain


What's your take, has EMC successfully rustled Data Domain away from NetApp, HP and Cisco?

Brad Reese
BradReese.Com Cisco Refurbished - Services that protect, maintain and optimize Cisco hardware
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This is going to have a

0

This is going to have a negative impact on Michael Morris's blog. This deal must not go through!

Cash Premium Offer

0

Interesting that former NetApp Chairman Don Valentine is a former Cisco Chairman too.

Am sure Michael Morris will do just fine in the future without blogging about his experiences helping to integrate Data Domain into NetApp.

It's pretty tough to beat a cash premium offer from another acquirer.

Sincerely,

Brad Reese
BradReese.Com Cisco Refurbished

FUBAR

0

How does EMC go from this:

http://chucksblog.emc.com/chucks_blog/2009/05/emc-world-wrap-up.html

to an acquisition offer for Data Domain.

Chuck Hollis Blog

0

Regarding your excellent reference to the Chuck Hollis Blog, it certainly appears that Chuck is not involved EMC's acquisition strategy.

It also appears giving keynotes at industry conferences is not an indicator that one's "role" within a company includes strategic acquisitions.

Putting a foot in my mouth has become second nature to me now, so I can relate directly to Chuck!

Sincerely,

Brad Reese
BradReese.Com Cisco Refurbished

Wall Street's Take on EMC Offer

0

Received the following research note this morning from RBC Capital Markets regarding the EMC offer for Data Domain, "EMC is flexing the muscles, EMC announced an all-cash offer for Data Domain that trumps NetApp's current offer. EMC announced a $30 all-cash per share offer for Data Domain (DDUP), which reflects a 20% premium to the cash and stock offer announced by NetApp. The EMC offer equates to an enterprise value of ~$1.8 billion for DDUP, with EMC funding the purchase with cash on-hand (~$7.8B for core EMC). EMC plans to commence a tender offer, which should enable them to close the deal sooner than NTAP's timeline of 90-120 days.

"EMC expects the transaction to be neutral to FY09 and accretive to FY10 non-GAAP EPS primarily through revenue synergies, not cost reductions. CEO Tucci noted he believes the market for back-up and archiving to be ~$10.0B and EMC's portfolio in this segment (Avamar) and DDUP would be ~$1.0B in sales. EMC's perspective is the combination of DDUP's technology (target based) and EMC's Avamar (source based) should enable EMC to accelerate the adoption of de-duplication across enterprise sector."

RBC added, "Regarding NetApp's offer, directors and executives of DDUP (~22% of the votes) pledged to support NetApp's offer, which may complicate EMC's offer, and if DDUP terminates NetApp agreement, DDUP is required to pay NetApp a termination fee of $57M, which is minuscule (~3%) in regards to EMC's offering price.

"Given the premium of EMC's all cash offer for DDUP, NTAP would need to raise its bid at or above $30 (currently $25) and offer an all cash transaction. NTAP currently has $2.6B of cash (net of GSA settlement), suggesting there is room/ability for NTAP to increase the offer. However, we would note NTAP has $1.34B of net-cash i.e., an all cash offer would weaken NTAP's balance-sheet, resulting in net-debt on its books."

RBC concluded, "Based on our valuation and historical P/E analysis, we estimate potential FTM P/Es of 18x/12x on upside/downside execution. Currently, EMC is trading at ~17x FTM EPS, implying positive sentiment, which is consistent with the average level across our coverage as investor sentiment has increased due to the belief that enterprise spending bottomed in 1Q09."

-----------------------------------------

Sincerely,

Brad Reese
BradReese.Com Cisco Refurbished

Data De Duplication

0

Quantum is the leader in data depluication with their DX and DXi virtual tape libraries

www.tapeoutlet.net

HP?

0

I'm not sure why HP gets mentioned as interested in Data Domain. HP already has deduplication technology - the VLS9000 family (targeting enterprise customers) are highly scalable and the D2D Backup System (competes with Data Domain and targets SMB) has technology developed by HP Labs.

EMC California Court Victory

0

Although HP's storage star David Donatelli may have been opposed to EMC buying Data Domain while he was employed with EMC, EMC's California Court victory today pretty much puts Donatelli out of the storage business for at least a year.

Perhaps HP's Roberson who no longer reports directly to Donatelli, will feel free to act independently of Donatelli's influence.

Sincerely,

Brad Reese
BradReese.Com Cisco Refurbished

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