About Restore

The email below appeared in my inbox yesterday.  The EDL/DL3D 1500/3000 has officially been discontinued.  It was obvious from the moment EMC purchased Data Domain that the Quantum stuff was dead, but it took time for EMC to finally admit this.  The strongest statement came in Frank Slootman’s TechTarget interview.  Clearly the EMC/QTM relationship was a rocky one from the beginning and so the outcome is not surprising.

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A couple of weeks ago, Robin Harris at Storagemojo blogged that he thought it would be a smart move for NetApp to acquire Quantum. I do not agree and think that a Quantum (QTM) and NetApp combination would create major competitive and business challenges and would not be successful in the long-term.

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Just a quick post to highlight Data Domain’s announcement that they have agreed to be acquired by EMC.  As mentioned in previous posts (see related posts below), NetApp did not have the financial strength to compete with EMC.

The companies that have lost the most in this deal are Quantum and NetApp, and it will be curious to see how NetApp responds.  I discussed NetApp’s situation briefly in Tuesday’s post.

As expected, EMC has increased their bid for Data Domain and is now offering $33.50 per share in cash. Data Domain has been ignoring EMC in favor of their preferred suitor, NetApp; however, with the recent increase, Data Domain has no choice but to consider the EMC offer.

This situation leaves NetApp in a tough spot. James Bond describes the situation perfectly in the movie, For Your Eyes Only,

“I’m afraid we’re being out-horse-powered!”

NetApp wants to acquire Data Domain (and the feeling is mutual), but they are being out-horse-powered by EMC. NetApp does not have the financial strength to go head-to-head with EMC’s increasingly aggressive all-cash offers. NetApp must be evaluating how badly they want Data Domain and at what cost.

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I was surprised when NetApp offered $1.5B for Data Domain and was even more surprised when EMC countered with an all cash offer of $1.8B. NetApp has since upped their offer to $1.9B of cash and stock. It is in the context of this uncertainty that I wanted to comment on a possible EMC/Data Domain acquisition.

What about EMC’s DL3D product line?
EMC sells target deduplication solutions (DL3D product line) through a partnership with Quantum. These products compete directly with those from Data Domain and rely on similar technology. (Data Domain disclosed that it had licensed Quantum’s deduplication patents in their own IPO documents.) Even though EMC strengthened their commitment to Quantum by providing a $100 million loan back in March, the Data Domain announcement raises serious questions about EMC’s commitment to Quantum. If Quantum’s technology was really good, then why bid almost $2B for a competing technology especially since they could buy Quantum for less than half of this amount.

Some have suggested that EMC is bidding on Data Domain because they want to hurt NetApp. This is certainly a possibility. However, EMC provided a very strong counter-offer and has to recognize that they may own Data Domain in the end.
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