A couple of looming deadlines could push EMC to decide whether it will flinch or plow ahead in its battle against NetApp over who will acquire storage dedupe specialist Data Domain.
The first deadline is the approach of the July 2 Data Domain shareholder meeting. While the acquisition is not expected to be an official topic during the meeting, expectations are that it will be brought up by shareholders.
The second is July 10, when the latest extension to EMC's current all-cash offer of $30 per share, or a total of about $1.8 billion, for Data Domain expires. EMC would then need to decide whether or not to file a new review on the same, or possibly better, terms.
Netapp on May 20 said it planned to acquire Data Domain for $1.5 billion in cash and stock. Next, EMC on June 1 bid $30 per share in cash, totaling $1.8 billion, for Data Domain. NetApp followed on June 3 with a cash and stock bid of $1.9 billion.
While Data Domain's Board recommends shareholders reject EMC's offer of $30 per share, it is not closing the door to an eventual deal with EMC.
The stake for both EMC and NetApp is high.
Data Domain is the leading vendor of deduplication technology, also called "dedupe," which removes duplicate information as data is stored, backed up, or archived. This results in a significant decrease in storage capacity requirements.
Both EMC and NetApp already have their own deduplication technologies. In EMC's case, it has at least three types thanks to acquisitions and OEM deals.
Channel partners of the two companies, along with other industry watchers, believe that the loser in the battle over Data Domain faces the risk of giving the impression that its own technology is inferior to that of its competitor.
Jay Kidd, chief marketing officer at NetApp, said it is interesting that EMC is continuing to reiterate its $30 per share offer for Data Domain, but not increasing it.
"The fact that [EMC has] proactively stated that their current offer is superior to ours raises the question, 'Why do they think they need to restate it if they think it is superior?'" he said.
The biggest issue between EMC and NetApp over Data Domain is the antitrust implications if EMC makes the acquisition, Kidd said.
EMC already has its own virtual tape library, the Enterprise Data Library, which includes dedupe, and has more than a 50-percent share of the VTL market, Kidd said. EMC also has its Avamar dedupe solution that it said in April has a bigger market share than does Data Domain.
Data Domain customers also see much more competition from EMC than from NetApp, Kidd said.
"NetApp doesn't really have a competing product," he said. "Our VTL tends to compete at a higher level than Data Domain [does], and has a much smaller market share."
Kidd also said it is important to realize that customers typically buy storage for one of three reasons: primary storage for production applications, secondary storage for data not accessed as frequently, and backup storage such as tape.
"Any of these could have dedupe," he said. "If done on primary storage for transactional data, it's different from if it's done at the backup level. Data Domain has a simple device for replacing tape. Our customers are moving from tape. Data Domain would give us a product we could take to existing customers to increase our existing footprint, or to new customers.
Kidd admitted that there is some dedupe overlap between NetApp's and Data Domain's products. "There's always some overlap at the edges," he said. "But Data Domain said they don't compete with NetApp as much as they compete with EMC."
There is also some channel overlap between NetApp and Data Domain, Kidd said.
"By one estimate, about 40 percent of Data Domain partners also carry NetApp," he said. "We get feedback from a lot of our channel partners that are excited because NetApp has a more mature channel program than Data Domain because of the age of our program."
Dedupe is a hot topic, and EMC views it as a pervasive technology across multiple markets, said B.J. Jenkins, senior vice president of global marketing at EMC.
"Many customers are looking for dedupe at the server level, and that's our Avamar technology," Jenkins said. "It's been incredibly successful. We also have dedupe technology for the target [storage array] from our relationship with Quantum and FalconStor. But there are multiple use cases, and Data Domain could help. And there are cases where we would continue to use Quantum."
Because the Data Domain product line still targets a somewhat lower level of customer requirements than does existing EMC products, getting it would be a good way to expand EMC's channel relationships, Jenkins said.
"We believe our global network of partners will be able to expand the Data Domain line broadly," he said.
Such an acquisition would also make it easier for solution providers to bring dedupe to customers, Jenkins said. "It would give EMC a full line of dedupe technology," he said. "Partners wouldn't have to assemble their own solutions."
An acquisition of Data Domain by EMC would also be a better cultural fit than if it were acquired by NetApp, as Data Domain has a lot of ex-EMC employees who would be welcomed back into the company, Jenkins said.
Finally, Jenkins, said, EMC has a great history of acquiring other companies such as VMware, investing in making their technologies successful, and then bringing their technologies to the channel. "And partners realize that," he said. "We think Data Domain would fit in great with EMC."
This article has been updated.