Everybody Loves Data Domain, Especially EMC

Are you sitting comfortably? Got a fresh supply of popcorn and libations? Good. This might take awhile.

Data Domain (Nasdaq: DDUP  ) sure isn't going gently into that good night. The data deduplication expert is caught in a tug of war between EMC (NYSE: EMC  ) and NetApp (Nasdaq: NTAP  ) , two storage stalwarts who both want Data Domain for its ultra-efficient enterprise backup products.

This morning, EMC CEO and Chairman Joe Tucci posted an open letter to Data Domain's employees -- not to shareholders -- where he promised them "a great and exciting future" in a diverse corporate culture that "doesn't acquire to consolidate." In other words, convince your board to go with EMC, and your job is safe. Go with the smaller NetApp, and you might become redundant, Joe Engineer.

EMC is doing this instead of raising its all-cash offer a smidgen. That tells me a couple of things:

  • The company is not in it just to be a nuisance and raise NetApp's buyout price after all. If that were the case, there would be a simple bidding war going on.
  • So EMC really wants Data Domain's unique assets. That's interesting, since EMC allegedly claims to be the market leader in deduplication already. If not in the game to raise the price tag, maybe EMC simply wants to remove Data Domain from the field of competitors?

Whatever the reason, EMC has upped the ante with this emotional appeal. As other leading storage specialists, including IBM (NYSE: IBM  ) , Hewlett-Packard (NYSE: HPQ  ) , and soon-to-be-acquired Sun Microsystems (Nasdaq: JAVA  ) , simply watch these antics from the sidelines, Data Domain's board won't give an official recommendation on EMC's $30-per-share tender offer until June 16, but still supports the NetApp bid.

And this game is far from over. Expect further fireworks, because I think that NetApp simply needs Data Domain more than EMC does.

More storage in Fooldom's data domain:

Fool contributor Anders Bylund holds no 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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