NetApp looks like it is coming off unscathed in its loss to archrival EMC in their bidding war over Data Domain, according to a new analyst report and several of NetApp's storage solution provider partners.
Analyst firm Robert W. Baird & Co. Monday upgraded its view of NetApp with a target price of $27 per share, compared to the company's actual share price on Friday of $22.46, citing a strong reseller channel that is helping it overcome intense competition from larger and smaller storage vendors.
EMC on July 8 entered into a definitive agreement to acquire Data Domain for $2.1 billion after beating NetApp in a prolonged bidding war for Data Domain.
Jayson Noland, an analyst at Baird, wrote in a report released on Monday that informal feedback from solution providers in July "continues to support a relatively positive view of NetApp business."
Solution providers told Baird that NetApp was "scrambling" a bit for business, but not more than usual, Noland wrote.
NetApp is feeling pressure from larger and smaller competitors, based on channel feedback, but seems to be doing well, Noland wrote.
"No surprise, we hear that EMC is 'getting better' at competing with NetApp, and resellers note momentum from smaller firms such as Compellent. That said, field checks continue to list NetApp as the leader in important growth categories [NAS, iSCSI]."
There's no mystery why NetApp is doing so well, said Glenn Dekhayser, vice president of technology at Voyant Strategies, a Hazlet, N.J.-based solution provider and NetApp partner.
What customers want and need is what drives sales, and in storage they turn to NetApp for scalability, performance, high capacity utilization, and especially a unified platform that lets them do both block and file storage on the same platform, Dekhayser said.
"Customers want the ability to be wrong, a Get Out Of Jail Free card," he said. "If you look at Dell EqualLogic or HP's LeftHand, you get iSCSI only. But what if you find out that iSCSI is not what you need? Compellent? What if you find out you don't need Fibre Channel? You have to go out and look for another solution. With NetApp, if a customer doesn't like the solution, or wants something else, they can just change it."
Compellent, Dekhayser said, is also a one-trick pony.
"It focuses on Fibre Channel," Dekhayser said. "It's an engineering company. Customers can use RAID 0 or 5 or 10 across the same disks, and use different parts of the same disk for different tiers of storage. It works. But I've never had a client ask me to do that. It's a problem that no one asked Compellent to solve."
Rather than be concerned about NetApp losing out to EMC over Data Domain, most of NetApp's channel partners actually breathed a sigh of relief.
Baird's upgrading of NetApp probably reflects the fact that the storage vendor did not win the bidding war for Data Domain, said Rolf Strasheim, director of client solutions at Peak UpTime, a Tulsa, Okla.-based solution provider and NetApp partner.
"It was a prudent business decision for NetApp to drop its Data Domain bid," Strasheim said. "And a prudent decision for its partners. I like the fact that NetApp saved $2.1 billion, and that EMC overpaid for Data Domain."
Dekhayser called EMC's decision to acquire Data Domain dumb because it conflicts with its other data deduplication technology.
"If I were an EMC stockholder, I'd be angry," he said. "$2.1 billion? It will actually cost EMC more, because it will cannibalize other parts of EMC's dedupe revenue. NetApp would not have had that issue."
Bob Olwig, vice president of business strategy at World Wide Technology, a St. Louis-based solution provider and partner to both EMC and NetApp, said he is not sure that NetApp was being "judicious" in bumping up the price of Data Domain as high as it went, especially since NetApp has done perfectly well on its own.
NetApp in the year since it signed World Wide Technology as a partner has done well, Olwig said. "We absolutely believe that NetApp will be a strategic partner of World Wide going forward," he said. "That's not to say there won't be competition. EMC is also a strategic partner, so we'll have to balance the relationship with the two of them."
Kurt Klein, CEO of CMT, a Santa Clara, Calif.-based solution provider and partner with both NetApp and Data Domain, said that his company would have preferred a NetApp acquisition of Data Domain, but that he has seen no difference at NetApp that would suggest any disruption after its bidding war loss to EMC.
Going forward, CMT will wait to see how the acquisition of Data Domain by EMC will change its channel relationship, said Vince Zappula, director of sales at CMT.
"Data Domain has struggled with a channel program, while NetApp has had one of the better channel programs," Zappula said. "We were looking forward to doing more with Data Domain."
