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Dedupe this: NetApp buying Data Domain

Surprise deal obscures good results

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Data Domain also gives it many new accounts into which it can sell its FAS hardware and software products, and the deduplication market has a long way to go before it reaches saturation.

Data Domain motivations

Why is Data Domain selling? Why have Frank Slootman and his team decided enough is enough? Surely it can't be the lure of faster international sales development? Surely it can't be a need for product development funding? They are sitting on a cash generation machine with Nehalem and clustering set to help continue a blistering growth path. The motivation here is not clear. Data Domain could buy Ocarina and deal with that technology gap problem at a stroke. The clustering technology must be in Data Domain's development labs already. What problem does Data Domain face that requires a NetApp acquisition as its solution?

Is it the case that Slootman and his team recognise that a stand-alone deduplication supplier cannot survive and prosper? Data Domain cannot transform itself into a general storage platform now that every storage array supplier has its own deduplication strategy in place, witness EMC with its Avamar acquisition and Quantum relationship.

This view would say NetApp is the haven Data Domain absolutely requires in the longer term because, as EMC has said over and over, deduplication is a feature, not a platform.

Looked at another way, this acquisition says as much about the relative weakness of NetApp's existing VTL product line as it does about the future for stand-alone deduplication storage array suppliers. Both are now probably finished, with the exception of niche, high-end, scale-out dedupe products such as those from Exagrid and Sepaton.

NetApp's previous experience of acquisitions could be described as patchy. Technology integration has proved problematic in the case of Spinnaker and clustering with it taking several years before clustering comes to maturity. NetApp's merged and cluster-capable ONTAP v8.0 release is expected later this year.

The Topio any-to-any replication technology acquisition resulted in NetApp learning that there wasn't as much of a market for that functionality as people thought. Nevertheless, with Data Domain being acquired and run as a separate business unit within NetApp, these problems shouldn't occur. Unless another bidder emerges and with both boards in favour it looks as if the acquisition is a done deal and a great deal.

Simple put, NetApp is buying the hottest deduplication technology and product line in the market.

NetApp earnings

In other news, NetApp announced fourth quarter fiscal 2009 revenues of $880m, down from the year ago quarter's $938m, with net income of $75m, $15m less than the year before. Full year 2009 revenues were $3.4bn, 3 percent higher than a year ago, with net income of $87m, well down on 2008's $310m. The earnings were better than Wall Street's expectations, NetApp having controlled its costs well. No guidance was given for the next quarter. ®

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