EMC to fight NetApp for Data Domain

Less than two weeks after NetApp Inc. laid down $1.5 billion to buy leading data deduplication vendor Data Domain Inc., EMC has come out and offered to pay $1.8 billion for the company.

During a conference call late Monday afternoon, EMC chief executive Joe Tucci said that by acquiring Data Domain, his company could increase its deduplication portfolio and earn more than $1 billion in revenue next year from the $10 billion deduplication market.

“We didn't just wake up one day and say maybe this is a good thing to do. We've had our eye on Data Domain and obviously somebody moved before we did,” Tucci said. “Even in stand-alone mode, you're a seeing projection of this company doing $480 million in revenue next year. We think we can grow it faster.”

NetApp said it was not willing to discuss EMC's offer at this time.

Data de-duplication, or single-instance storage, involves the elimination of redundant data. Hash algorithms mark data blocks with unique numbers, and those numbers are compared so that duplicate pieces of data can be left out of the storage process.

EMC chief financial officer David Goulden said he expects the deal with Data Domain would close in the second half of this year.

EMC already sells deduplication technology in its Avamar appliance product, which it obtained when it purchased Avamar Inc.for $165 million in 2006.

The company also sells the DL4000 virtual tape library, a disk array that runs re-branded software from FalconStor Inc.

Tucci said Data Domain's technology is complimentary to EMC's existing deduplication products. EMC's Avamar product is targeted at deduplication on the application server or source side, reducing the amount of data sent over networks and to primary storage devices. Data Domain's product is aimed squarely at the backup and archive process, or target side.

“I wanted to own this [deduplication] technology on both the target and the source side and I do believe the company that figures out how to do on both sides will have a great advantage,” Tucci said.

Asked if EMC would end of life the DL4000 VTL, which is also targeted at the backup side of deduplication, Tucci said they will continue to sell it and “make a nice family” of deduplication products.

Tucci said EMC would also prove the be a better suitor of Data Domain because it has a history of treating its acquisitions better by retaining the talent and keeping products as separate. If EMC were to buy out Data Domain, it would more than likely eventually run it under the same business division as its Avamar product line, Tucci said.

“It would make sense over time to have the two [products] work together with a sales force focused on the content and archiving space,” he said. “That's how we'll put this together.”

EMC is offering all cash for Data Domain. NetApp's offer was a cash and stock deal.