EMC hopes for Data Domain 'I do'
NetApp left standing at the altar
It's all very well having separate deduplication silos, but big gains will come from being able to globally deduplicate data centrally that has come in from branch offices, where it will probably already have been locally deduped. Indeed, Quantum's recent DXi2500-D announcement provides a branch office local dedupe appliance with replication to a central DXi7500 box, completely in line with this idea.
It would therefore be good to replicate the centrally deduped data to a disaster recovery site. This scenario implies consistent deduplication technology across multiple tiers and locations of storage. Having different dedupe silos would be an obstacle to this.
The way Dan Warmenhoven and Frank Slootman told it to NetApp employees, the NetApp bid for Data Domain was apparently cooked up in private. Yet the EMC letter talks of prior and known EMC interest, stating: "We are disappointed that we were not given an opportunity to explore a business combination prior to the announcement of your proposed transaction with NetApp, particularly since I believe you should have been aware of our interest."
It seems clear that there has been no direct executive-level contact between EMC and Data Domain, however. We have a hostile bid by EMC - one which many will judge to be defensive - which puts Data Domain firmly in play. Its share price rose to $24 after the NetApp bid was announced, from $17.91 the day before that bid. The shares are now trading at $31.38, rendering the NetApp bid much less attractive, and slightly above the EMC bid level.
Will NetApp come back with a higher bid - something around $2bn - or will it fold its hand? If it folds then it will have a perceived weakness in the disk backup dedupe product area, and will face an EMC-energised Data Domain attacking its current and potential customers. It is what some would call a lose:lose scenario.
For NetApp to press ahead would mean a significantly higher offer and perhaps one with a greater cash element. It's all very well having a great relationship with Slootman and his board and executive team, but the Data Domain shareholders have the last word and they are having lots of EMC dollars dangled in front of their eyes.
Their message to NetApp must be: "You wanna dance? Then buy me dancing shoes, baby. A good pair. More than $30." Has NetApp got access to a deep enough wallet?
It's also possible that other vendors will enter the fray. Some observers would say HP could do with a stronger mid-range dedupe product. Its OEM'd Sepaton product line has great high-end strengths, while its in-house dedupe technology doesn't have anything like Data Domain' traction.
Then there is Dell, which has said it will do something with Quantum's DXi technology and which already uses Symantec and CommVault dedupe products. Is it now contemplating bidding for the dedupe market leader?
If it does, then it might assume the bidding will head towards $2.5bn, assuming NetApp responds at the $2bn level, with EMC rebidding at $2.2bn or thereabouts. HP would be having similar thoughts.
Does this imbroglio also imply that FalconStor is also in play? That company has just released a statement saying it has the fastest VTL, deduplication and replication technology of them all. Is this a signal?
Data Domain and NetApp will issue responses later today. Let's sit back and enjoy the coming show. ®