EMC out-trumps NetApp, or not

July 13, 2009 – Now that the bidding battle for Data Domain is over, with EMC set to lay out a whopping $2.1 billion, the question is: What’s next?

To get the opinions of analysts such as the Enterprise Strategy Group’s Steve Duplessie and Wikibon.org’s Dave Vellante, check out senior editor Kevin Komiega’s blog post, “Is Data Domain a good fit for EMC?”

I draw two conclusions from this saga:

--EMC paid way too much
--NetApp did the right thing

I thought the original bid of $1.5 billion was too high, but $2.1 billion for a data deduplication vendor?? With some vendors giving away deduplication for free (most notably, EMC and NetApp) users’ expectations re the cost of deduplication are going down. I’m told that a Data Domain implementation can get real costly real quickly, but even EMC won’t be able to keep those margins up over the long run. As such, EMC’s ROI for Data Domain appears questionable. And that’s a lot of money to pay just to keep a technology out of a competitor’s hands. EMC may appear to be victorious, but it’s a Pyrrhic victory at best.

NetApp officials did the right thing by ditching their egos and walking away from the bidding war. In fact, you could almost argue that NetApp is the victor in this battle.

So what’s next for NetApp? The conventional wisdom is that the company must make acquisitions – particularly on the software front – to round out its IT stack and stay competitive with EMC, IBM, HP, etc. And if you cruise the blogs you’ll find that acquisition speculation tends to focus on vendors such as CommVault, FalconStor, etc. and primary storage optimization vendors such as Ocarina. That assumes that NetApp is as dizzy over dedupe as it appears to be.

My guess is that NetApp will resume its acquisition attempts, but not in the deduplication arena. I think we’re in for some more surprises, and probably in the near future.

And in unrelated news . . .

Also last week, Broadcom appears to have dropped its hostile takeover bid for Emulex after getting rebuffed yet again on its sweetened offer. Something tells me this one isn’t over yet. Broadcom needs Fibre Channel – or at least Fibre Channel over Ethernet – technology, and Emulex isn’t the only Fibre Channel expert in the OC.