EMC Responds

First, I'd like to thank NetApp and EMC for providing an almost endless source of content for blogs. In both of my entries on NetApp's attempted acquisition of Data Domain, I suggested that EMC would have to respond. And they did on Monday, to the tune of almost $2 billion in cash for Data Domain.

In my opinion, this deal is far more complicated than a merger with NetApp would have been; EMC after all has already loaned $100 million to Quantum, has a relationship with FalconStor, owns Legato Networker and, of course, has its own source side dedupe technology from Avamar. This can be a challenge, but EMC is now very used to offering competing solutions from within its own product portfolio.

While Joe Tucci in his remarks pointed to EMC's successful track record of successful acquisitions, I can't argue that they have gotten better at it -- but I don't think I would say successful. They do OK with them and a few of them end up delivering better technology as a result.

The first question is what will EMC do with Data Domain?

Ironically, more of what I said in my last entry "NetDomain" can be applied to EMC. They need a real primary storage deduplication strategy so they will want to integrate this technology into their primary storage faster than in the NetApp case. Also, they have first hand experience in acquiring a strong company and leaving it alone in VMware. I expect them to do the same with Data Domain -- totally hands off. If NetApp didn't want to screw up a $1.5 billion dollar deal, I can assure you that EMC does not want to screw up a $1.8 billion dollar deal.

The only challenge to this? I don't know how EMC can run Data Domain as a separate organization with all these other competing product lines. It would seem a little odd for Avamar guys and Data Domain guys fighting over accounts. My guess is that EMC will have to give the Data Domain team the complete backup portfolio.

The second question: Will NetApp respond?

In my opinion, NetApp will have to respond now with a similar offer. My sense is that Data Domain as an organization was far more comfortable getting bought by NetApp than they were by EMC and they will do everything they legally can to help NetApp win this deal.

This has clearly gotten out of the price range of many if not most technology companies, but it now puts pressure on some of them to do something. A huge beneficiary of all this focus on storage optimization are going to be smaller companies like Ocarina Networks, Storwize, Riverbed, Exagrid, Permabit and others.

In a future entry I'll explore the subject of where the rest of the industry gets their storage optimization technology from.

The final question: Will there be a mysterious third bidder?

There is someone else lurking in the wings on this deal and I think now that the gloves are off, we will see someone else enter the contest for Data Domain -- more on that later. I'll give you a hint though, it starts with a "C".

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