CORRECT: UPDATE: NetApp Raises Data Domain Bid
June 03 2009 - 1:10PM
Dow Jones News
NetApp Inc. (NTAP) raised its offer for Data Domain Inc. (DDUP)
to $30 a share, matching the bid from rival EMC Corp. (EMC), as the
two data-storage makers spar over one of the fastest growing
companies in the sector.
The revised offer, which remains a combination of cash and
stock, comes after EMC this week topped NetApp's earlier
$25-a-share offer for Data Domain with a bid of nearly $2 billion,
all in cash. Last month, Data Domain agreed to accept NetApp's
$25-a-share offer.
Data Domain shares were recently up 2.9% premarket at $32.50 as
investors position themselves for a potential final agreement above
the current $30 bids. Analysts say both NetApp and EMC are likely
willing to go higher.
Jefferies analyst Bill Choi estimated that NetApp could push the
price as high as $35 a share, though EMC could go further to
acquire the company.
NetApp Chairman and Chief Executive Dan Warmenhoven said
Wednesday, "Our strategic rationale remains the same and we firmly
believe that the combination of our two companies will provide a
greater opportunity and risk-adjusted value for Data Domain
shareholders, customers and partners."
EMC was not immediately available for comment. Data Domain
declined to speak on the matter.
While such takeover fights have been scarce in the technology
sector, Oracle Corp. (ORCL) recently outbid International Business
Machines Corp. (IBM) in its effort to win Sun Microsystems Inc.
(JAVA). Analysts have said depressed prices for small companies and
cash hoards at big companies may lead to more competitive deals in
the sector.
Data Domain specializes in technology for "deduplication," or
avoiding repeated storage of the same data. The technology can
reduce demand for storage devices, and it is a selling point at a
time when corporate computer chiefs are trying to cut hardware
costs and save floor space and electricity use in computer
rooms.
The company has churned out strong growth amid the recession,
more than doubling revenues to $274 million in 2008 from the prior
year. Currently, analysts expect on average 2009 revenues of $367
million according to Thomson Reuters.
Data Domain remains a relatively new player in the data-storage
sector and lacks the distribution networks and massive sales squads
of its larger competitors. By teaming with EMC or NetApp, the
company would gain access to a much wider array of customers and
markets, offering a chance at even faster growth.
"In the hands of someone else, it's certainly worth a lot more,"
Jefferies' Choi said.
EMC shares were recently down 3.4% to $12.42 premarket; NetApp
gained 0.3% to $19.40.
-By Jerry A. DiColo, Dow Jones Newswires; 201-938-5670;
jerry.dicolo@dowjones.com
(Tess Stynes contributed to this report.)