EMC Acquires Data Domain For $2.4 Billion

When Data Domain agreed to be acquired by NetApp for $1.5 billion in May, the storage company may have undervalued itself by nearly $1 billion. Competing bidder EMC (NYSE: EMC) agreed this week to buy the deduplication specialist for $2.4 billion.

EMC is paying cash for Data Domain, the preferred currency over stock in these days of economic recession. NetApp's first offer for Data Domain was for $1.5 billion in cash and stock. After a few weeks of spirited bidding, NetApp dropped out of the competition.

With businesses storing 50% more data each year, according to some market research estimates, EMC is betting the acquisition will pay off. EMC said it expects the acquisition to be accretive to its non-GAAP earnings in its 2010 fiscal year.

"This is a compelling acquisition from both a strategic and financial standpoint," said Joe Tucci, EMC chairman, president, and CEO, in a statement. "We look forward to bringing Data Domain together with EMC to form a powerful force in next-generation disk-based backup and archive."

With government regulations and legal measures continuing to grow, deduplication's reduction of redundant data is becoming more important. EMC has some deduplication technology in place, but its acquisition of Data Domain and its deduplication offerings will help give it a leg up in the storage segment. While tape storage is still in widespread use, chief information officers increasingly want the speedy access offered by spinning disks and other disk storage technologies. Deduplication is helping in the shift from tape to disk backup and archive storage.EMC said the acquisition, which is expected to be completed later this month, is expected to have a total enterprise value of $2.1 billion, net of Data Domain's cash.