NetApp to acquire Data Domain for $1.5 billion

The deal will extend NetApp's reach into the growing disk-based backup market

Storage vendor NetApp has agreed to acquire Data Domain, a maker of disk-based backup products, for about US$1.5 billion, the companies announced Wednesday.

NetApp will buy all outstanding shares of Data Domain for $25 per share in cash and stock. The deal has been approved by Data Domain's board of directors and is expected to close within 120 days following the customary approvals, the companies said.

Data Domain will become a product line within NetApp and the companies' sales organizations will be integrated. NetApp's global sales, support and partner network of NetApp will extend the reach of Data Domain's products, the companies said.

Data Domain specializes in backup systems with data de-duplication technology, which reduces the amount of storage space required for backups by eliminating redundant bits of data.

The company began shipping products in 2004 and went public in 2007. The companies said Data Domain's products are complementary to NetApp's own backup systems.

Despite the current economic downturn, demand for storage capacity is growing rapidly. IDC estimates the total disk storage capacity shipped in 2008 was up more than 40 percent from a year earlier. To deal with that trend, enterprises are beginning to turn to data deduplication in disk backup.

NetApp, one of the biggest vendors in storage, announced in February that it would lay off 500 of its approximately 8,000 employees. On Wednesday it reported revenue of $880 million [m] for its fiscal fourth quarter ended April 24, down from $938 million a year earlier.

But it posted a quarterly profit of $75 million, or $0.23 per share, matching the expectations of analysts surveyed by Thomson Reuters. NetApp made a profit of $87 million for the full 2009 fiscal year, down from $310 million the prior year.

Last month, NetApp announced a partnership with Cisco Systems to jointly develop a "unified storage architecture" as part of Cisco's Unified Computing strategy of combining networking, computing and storage in virtualized data centers.

NetApp has also worked with virtualization giant VMware to integrate its storage systems under VMware's management interface.

In after-hours trading on Wednesday, NetApp shares (NTAP) were down $0.24 at $17.10. Data Domain had soared $6.09 to $24.00.

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Stephen Lawson

IDG News Service
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