Data Domain urges shareholders to vote NetApp

The bidding war for storage deduplication vendor Data Domain has intensified with the company’s recommendation that stockholders reject EMC’s all-cash offer of $1.9 billion.

Rival storage vendor NetApp was the first to make an offer for the company of $1.5 billion, a 25% premium for the money-making dedupe vendor.

Following EMC’s bid, NetApp was forced to revise its bid to match EMC’s offer. Data Domain is encouraging shareholders to accept this offer.

“We are very pleased with Data Domain’s recommendation that stockholders continue to support NetApp’s merger proposal over EMC’s unsolicited offer,” said NetApp CEO Dan Warmenhoven.

“In our merger, we believe customers will benefit from a lower risk of business disruption, continued competition, an enhanced products and services offering, and the ability of the NetApp sales and marketing organisation to bring Data Domain’s products to more enterprises in the United States and to more customers in Europe and Asia,” he said.

“Furthermore, we believe employees will benefit from cultural compatibility and the ability to accelerate productivity and innovation given the existence of complementary products and a larger base of resources.”

The ball is now in EMC’s court, at least until Data Domain calls a shareholder vote. While it has the resources and cash reserves to make a revised bid in an attempt to win them over through financial brute force, its first offer already represented a 20% premium on NetApp’s original bid.

Currently, stockholders are the real winners: the tabled offer is currently at around $30 a share, a figure that values the company at around 85 times its expected earnings for the year.

It is also likely that EMC sees dedupe as part of its vision for solid state drives (SSD). With the benefits of SSD offset by its significantly higher cost-per-megabyte than regular spinning hard drives, anything that improves the efficiency of stored data is highly desirable.

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