Storage systems vendor NetApp has announced its intention to acquire rival back-up provider Data Domain for $1.5 billion.
Data Domain is an established supplier of back-up de-duplication technology, which cancels out redundant data in a storage array. According to some estimates, as much as 75% of a typical organisation’s data footprint is duplicated.
That explains why Data Domain’s financial performance has been bucking the dismal trend of late. Last month, the company reported first quarter revenues of $79 million, a 50% increase from the year before. It has 3,100 customers and employs around 800 people.
NetApp, meanwhile, has been less fortunate. Alongside its planned acquisition, the company also revealed yesterday a revenue decline of 7% for its first quarter of the year, down to $880 million. The company declined to give a revenue forecast for the coming year.
The price NetApp agreed to pay represents a 25% premium for Data Domain, based on its closing share price yesterday.
Earlier this month, NetApp issued a press release touting its own deduplication technology. “NetApp continues to offer the most compelling deduplication solutions to help our customers increase storage efficiency and save time and money,” said marketing VP Patrick Rogers in the release.
Clearly, however, NetApp believes it needs to own Data Domain’s technology in order to compete effectively with storage powerhouse EMC. Because at a price that equates to nearly half a million dollars per customer (and $1.9 milion per employee) the acquisition does not make sense as a market share grab.