Game, Set, and Match for NetApp?

What is this, the French Open? NetApp (Nasdaq: NTAP  ) and EMC (NYSE: EMC  ) are trading shots over who's going to acquire data deduplication expert Data Domain (Nasdaq: DDUP  ) like Andy Murray and Fernando Gonzales trading blistering forehands over the red clay of Roland Garros.

Quick recap for those who blinked and missed it all: NetApp placed an offer for Data Domain at $25 per share in cash and stock, EMC said "Na-ah!" and started a $30 per share unsolicited tender offer. The ball was back in NetApp's court, and you just knew that the action was about to heat up.

And heat up it did. Now NetApp has matched EMC's $30 per share offer, albeit still with a combination of cash and stock versus the bigger boy's all-cash offer. EMC immediately told investors to just take the tender offer, and nudged Data Domain's board "to not take any actions that would further impede a transaction that is a superior alternative for Data Domain's shareholders."

But the board didn't listen and simply approved NetApp's new proposal. Data Domain CEO Frank Slootman said that this deal "will provide great value to our shareholders and customers."

So the ball is firmly back in EMC's court. The fact that Data Domain's stock now trades at $32.75 per share, a good 9% above the accepted offer price, tells me that shareholders are not particularly interested in EMC's original tender offer and are expecting a higher offer or two. Considering how fast this saga has played out so far, I wouldn't be surprised to see another move or two in the coming week.

Of course, if Data Domain's owners vote down any of these offers at the special shareholder meeting that seems impending, they may coax a higher value out of their holdings -- but should also remember the lessons learned from failed takeovers like Microsoft's (Nasdaq: MSFT  ) pursuit of Yahoo! (Nasdaq: YHOO  ) and Electronic Arts (Nasdaq: ERTS  ) trying but failing to marry Take-Two Interactive (Nasdaq: TTWO  ) .

Take-Two now trades about 66% below EA's offer price, and Yahoo's owners could have taken the money and ran rather than sitting out a 45% fall (from the initial offer price).

And maybe those failures are the reason why everyone is moving so darn fast here. I think there'll be a firm deal by the time we crown the Wimbledon champ.

Further Foolishness:

Take-Two Interactive Software is a Motley Fool Rule Breakers recommendation. Electronic Arts is a Motley Fool Stock Advisor pick. Microsoft is a Motley Fool Inside Value pick. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Anders Bylund owns shares in Take-Two Interactive (bought after the failed takeover but before the Great Panic of 2008), but he holds no other position in any of the companies discussed here. You can check out Anders' holdings or a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On June 05, 2009, at 2:20 AM, TSIF wrote:

    I don't think if NETAPP wins that it's a "loss" for EMC. Forcing NETAPP to dig much further into it's more limited coffers is a win for EMC who already has several competing products. IF EMC does come up with the fish, then they can trim some existing products, gain DDUP's customers and that's still a win. If I was a DDUP stockholder, I wouldn't be looking for a higher offer from EMC...they don't tend to play that game, but then again they do tend to get to small companies with a wad of cash first and no bidding wars.

  • Report this Comment On July 02, 2009, at 10:46 AM, bwhitmanga wrote:

    One thing not mentioned though... about 70% of the DDUP shareholders are institutional investors. They are cash-starved and see a 1.8B cash offer a lot more attractive than a 1.9 cash and stock. these investors are on the hook to keep their funds at a certain level of liquidity and cash is what they need right now, not stock. as a result, there have already been several lawsuits filed by these investors and many think they may un-seat the board of DDUP. so I don't agree with your comment of "The fact that Data Domain's stock now trades at $32.75 per share, a good 9% above the accepted offer price, tells me that shareholders are not particularly interested in EMC's original tender offer and are expecting a higher offer or two."

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