Data Domain Can Go Its Own Way

You can go your own way, Data Domain (Nasdaq: DDUP  ) . NetApp (Nasdaq: NTAP  ) is left at the altar with a broken heart, watching EMC (NYSE: EMC  ) walk away with its intended bride.

In a soap opera that rivals that of Fleetwood Mac's Stevie Nicks and Lindsey Buckingham, Data Domain's deduplication expertise attracted two handsome suitors. Storage giant EMC is the bigger and richer of the two, while smaller rival NetApp wanted to springboard off this merger to perhaps grow to EMC's stature in the next few years.

After a month of dueling press releases and SEC filings, NetApp has thrown in the towel. NetApp can't match EMC's deep pockets, and when push comes to shove, more cash beats idealistic growth notions every time. NetApp CEO Dan Warmenhoven "cannot justify engaging in an increasingly expensive and dilutive bidding war that would diminish the deal's strategic and financial benefits."

So EMC's $33.50 bid per Data Domain share now has the full backing of Data Domain's board of directors, making for a $2.1 billion sticker price once you back out Data Domain's $250 million or so in cash equivalents. The shareholder meeting to vote on the already-signed NetApp combination has been canceled, and the EMC merger should be consummated by the end of July. Data Domain is "packing up, shacking up" with the unsolicited latecomer to this bidding war.

I still think that EMC never really wanted Data Domain to itself. NetApp doesn't have an in-house deduplication product, while EMC bought Avamar three years ago to get into that game. Granted, that was a much smaller deal at $165 million, and Data Domain brings a distinguished client list that includes media serving expert TiVo (Nasdaq: TIVO  ) and Canada's licensee of satellite radio maven Sirius XM (Nasdaq: SIRI  ) among its highest-profile names. This still smells like a big bully mostly wanting to keep Data Domain away from ambitious competitors. Nevertheless, EMC expects the deal to generate fresh operating profits as early as next year.

NetApp can call it another lonely day -- and then go looking for some other way to bolster its growth efforts. May I suggest bite-sized bids for something like storage veteran turned deduplication specialist Quantum (NYSE: QTM  ) , or backup expert 3PAR (NYSE: PAR  ) ? You can go your own way, of course.

Further Foolishness:

Fool contributor Anders Bylund holds no position in any of the companies discussed here, and he never stops thinking about tomorrow, because it'll soon be 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 July 10, 2009, at 6:54 AM, SIRIDoom wrote:

    FIRST MAN TO EVER DESTROY A MONOPOLY

    Yes, Mel Karmizine (Karmacrook) could go down in the history books as a big man. The first man in the history of the United States Stock Market to single handedly destroy a billion dollar corporation with monopoly over an entire industry.

    SIRI from 12.00 to 8 cents in 11 months.

    SIRI the only company to ever merge a bankrupt 11 billion dollar debt company XM, with a working model company SIRI.

    SIRI less than 8 months after the merger, Stock saturation over 83 percent in new issue and guarantees

    SIRI DEBT

    2010: ~$500mil in interest plus $350 in loans coming due

    2011: ~$500mill in interest plus $650 in bonds and loans due

    2012: ~$500mil in interest plus $500mil in bonds and loans due

    2013: ~$500mil in interest plus $1.8bil in bonds and loans due

    2014: ~$500mil in interest plus $555mil in bonds and loans due”

    Way to go Mel!!! Big Man!!!

    How about some news on the New Subscribers from the Ipod App.???

    Be ready to dump SIRI.

  • Report this Comment On July 10, 2009, at 6:21 PM, JRSmithman wrote:

    Dump Siri it will not go below .35 that money you see at .35 is the laon it got from Liberty you cant dump a stock from 0 lol this has been at .35 for 6 months

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