Feeds

NetApp ponders getting off the pot, or...

Warmenhoven's carefully constructed holding position

Internet Security Threat Report 2014

Comment What do you make of this? "In response to EMC’s revised, unsolicited offer, the NetApp Board of Directors will carefully weigh its options, keeping in mind both its fiduciary duty to its stockholders and its disciplined acquisition strategy. We will provide an update shortly."

The statement maker is NetApp's chairman and CEO, Dan Warmenhoven, responding to yesterday's uprated EMC all-cash bid for Data Domain at $33.50/share, trumping NetApp's $30/share part-stock, part-cash bid. Data Domain's board has already agreed the NetApp bid, with Data Domain CEO Frank Slootman having received a warm welcome at a NetApp all-hands meeting at Sunnyvale last month. Now he might have to fly to Hopkinton, Massachusetts, and say how pleased he and his company are to be welcomed into the EMC fold - cue much gnashing of teeth.

EMC's offer is free of deal protection, clear of any FTC encumbrance, not dependent on any due diligence, and the cash is available now; you can smell the money.

NetApp's bid has deal protection and needs a month longer than the EMC bid to clear. The NetApp people know EMC has greater cash resources - $2.7bn is being suggested - than NetApp, where $1.2bn is the figure being used, with half of that invested outside the USA and liable for tax if brought into the USA for use in the bid.

In this game of bid-tennis NetApp has anticipated a possible EMC bid raise in its analysis and, equally obviously, has anticipated what it could do. So EMC has served up a $33.50 ball. One response is to return it with a dropshot by matching the bid with its own $33.50 part-stock, part-cash offer, get Data Domain to accept it, as before, and see what EMC does.

Another possible return is to hit is straight back with force, raising the stakes to $34.00 or even $35.00/share, saying to Joe Tucci: "Put up or shut up." The trouble is Tucci has more cash and can keep the rally going for longer until NetApp runs out of steam.

What will EMC do if NetApp matches its bid? It will probably raise its own bid a little and enjoy its own "put up or shut up" game and wait for NetApp to feel the heat and get out of the kitchen. There's no upside for NetApp in a cash competition. If EMC is willing to pay more for Data Domain and DD shareholders prefer Hopkinton dollars to Sunnyvale shares, then game over and Dan Warmenhoven walks.

The talk of fiduciary duty and disciplined acquisition strategy is not evocative of an aggressive, gung-ho approach. It could be taken as preparation for a tactical withdrawal so that NetApp could turn its attention to the next target in its acquisition strategy.

Who might that be? Storage commentator Robin Harris suggests Quantum. There's mischievous cheek here as EMC has loaned debt-burdened Quantum $100m to help it continue its DXi deduplication development work, and both EMC and Dell license Quantum's deduplication technology.

Oh, the joy of it, to have EMC licensing NetApp-owned de-duped technology. How Dan Warmenhoven might relish calling up Rick Belluzzo, Quantum's CEO, and invite him to dance the Sunnyvale samba? Joe Tucci would be in a twist, with people at NetApp gleefully thinking revenge is a dish best served hot, spicy and quick.

Such considerations would be dismissed at NetApp executive levels of course. We're talking fiduciary duty and disciplined acquisition strategy here, not a corporate ego contest. Also Quantum wouldn't bring a great increase to NetApp's cashflow, it not having a successful market-leading product like Data Domain, on the one hand, and being held back by its debt repayments on the other.

If NetApp did try to buy Quantum, with EMC, bulked up by Data Domain, prevented from bidding by anti-trust concerns, then it would watch as EMC became awash with Data Domain dollars and carried on marching towards the information infrastructure horizon, leaving pure storage play NetApp even further behind in the revenue stakes. ®

Beginner's guide to SSL certificates

More from The Register

next story
Docker's app containers are coming to Windows Server, says Microsoft
MS chases app deployment speeds already enjoyed by Linux devs
'Hmm, why CAN'T I run a water pipe through that rack of media servers?'
Leaving Las Vegas for Armenia kludging and Dubai dune bashing
'Urika': Cray unveils new 1,500-core big data crunching monster
6TB of DRAM, 38TB of SSD flash and 120TB of disk storage
Facebook slurps 'paste sites' for STOLEN passwords, sprinkles on hash and salt
Zuck's ad empire DOESN'T see details in plain text. Phew!
SDI wars: WTF is software defined infrastructure?
This time we play for ALL the marbles
Windows 10: Forget Cloudobile, put Security and Privacy First
But - dammit - It would be insane to say 'don't collect, because NSA'
Oracle hires former SAP exec for cloudy push
'We know Larry said cloud was gibberish, and insane, and idiotic, but...'
Symantec backs out of Backup Exec: Plans to can appliance in Jan
Will still provide support to existing customers
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.