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Data Domain Expands Its Capacity

Data Domain (Nasdaq: DDUP  ) wants tape storage to become a historical artifact. It's already making headway on this lofty goal, and it has the growing customer base -- not to mention improving quarterly numbers -- to prove it.  

In its third-quarter results released on Tuesday, Data Domain reported a sizzling 189% increase in revenue to $32 million, as well as an addition of 228 customers. The net loss came to $880,000, or $0.02 per share, but that compares favorably with a loss of $1.2 million, or $0.11 per share, in the same period a year ago.

Providing data backups using disk-based approaches, Data Domain develops solutions for "deduplication" -- a process of reducing storage needs by eliminating redundant data. It's now protecting more than 185 petabytes of data. That's 185 million gigabytes.

The company at this point is focused on grabbing growth, not showing profits. On the conference call, CEO Frank Slootman said his company is in a "race" to sign up customers and said the market opportunity for Data Domain is still in the early stages.

As a result, Data Domain is ramping up expenditures for sales and on research and development on new products. For example, the company's new DD580 system is getting lots of traction, especially with enterprise customers. Data Domain has also extended its move into new platforms, including VMware's (NYSE: VMW  ) platform.

The upshot is that Data Domain continues to notch customer wins against its rivals, such as EMC (NYSE: EMC  ) , Network Appliance (Nasdaq: NTAP  ) , and Quantum (NYSE: QTM  ) .

Like any hypergrowth company, Data Domain's shares have been volatile. Since its Q3 earnings announcement, the stock price is down about 12%. Perhaps one issue is that the company has registered to sell 8.5 million shares, a move that could put some pressure on the stock price.

But looking at the long term suggests that corporate America will continue to move away from tape drives to deduplication because of the cost savings and improved performance. And based on the customer uptake and product innovation, it looks as though Data Domain should enjoy more growth for quite some time.

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