EMC’s all-cash bid to buy Data Domain is going to be hard to beat, according to Stifel Nicolaus analyst Aaron Rakers.
EMC’s US$1.8 billion bid, announced Monday, is worth $30 per share in cash, a 20 percent premium over a previously accepted bid by NetApp of $25 per share. NetApp’s bid included payment of $11.45 in cash and 0.75 shares of its stock for each Data Domain share.
NetApp may increase its bid, Rakers suggested in a research note issued Tuesday.
However, “EMC’s all-cash offer, and likely further room to increase, puts NetApp in a tough position in terms of a counteroffer,” he observed.
NetApp spokesperson Kevin York declined the E-Commerce Times’ request to comment Tuesday on any possible counteroffer to the EMC bid.
Data Domain spokesperson Edward Luboja also declined Tuesday to answer questions from the E-Commerce Times about the competing bids, or whether the company has heard about possible counteroffers.
Data Domain’s shares were up nearly 19 percent in early afternoon trading on Tuesday, one day after the announcement. EMC’s shares were up 2 percent. NetApp was trading off 5 percent.
EMC first plans to buy all of Data Domain’s outstanding shares of common stock, followed by a second step in which it would merge any remaining shares.
Data Domain would emerge as a product division within EMC, and its senior management team would remain intact, Data Domain CEO Joseph Tucci said in a letter to Data Domain president Frank Slootman, released as part of its announcement of the bid.
NetApp and Data Domain announced plans to merge on May 20 in a deal valued at $1.5 billion.
The companies lauded the deal as one that would help fast-growing Data Domain expand sales worldwide.
However, EMC officials said their deal was better because it was all-cash, offered more certainty, and provided better synergies than the NetApp deal.
Different Methods of Deduplication
Deduplicating technology involves removing repetitive pieces of information — multiple copies of identical documents stored in different files, for instance — and replacing them with pointers leading back to the original source.
Data Domain’s deduplicating technology, which differs from EMC’s, would be a good fit in a combined company, EMC officials said.
Data Domain specializes in target-based deduplicating technology that uses network-attached appliances to process data sent across the network for storage. EMC specializes in source-based technologies, which use software to remove duplicate entries before transporting data across the network.
EMC projected combined deduplicating revenue of $1 billion in 2010, a figure that Stifel’s Rakers said could result in a 4-cent boost to EMC’s 2010 earnings per share figure.