Storage Soup

May 21 2009   5:25PM GMT

NetApp looks to get one right

Dave Raffo Dave Raffo Profile: Dave Raffo

Like all large acquisitions, NetApp’s $1.5 billion purchase of Data Domain leaves a few lingering questions in its wake.

The first is, will this be another acquisition that blows up in NetApp’s face? Let’s face it, NetApp hasn’t hit any home runs in past pickups. A quick look at its track record shows NetApp:

• bought Spinnaker for $300 million five-and-half years ago, and still hasn’t fully integrated the code into its Data OnTap operating system.

• paid $272 million for Decru in 2005, only to be frustrated when the appliance-based encryption market never developed.

• acquired Topio for $160 million in 2006, and discontinued selling its heterogeneous replication software at the end of last year.

NetApp president Tom Georgens is quick to point out the 2008 acquisition of Onaro for $100 million has worked out. Georgens says the SANScreen SRM software NetApp got from Onaro has sold well above expectations in the first year since the deal.

But even counting Onaro as a hit still leaves NetApp with a poor average with acquisitions.

NetApp CEO Dan Warmenhoven found himself on the defensive on the NetApp earnings call Wednesday night when asked about previous acquisitions. “Spinnaker was completely integration — we tried to fuse together two separate technologies,” he said. “That was a much harder problem than we anticipated going in. Decru had a little bit different outcome. While I agree with you it was not to the fulfillment of our expectations, I think it was because we saw that market shift much faster than we thought.”

Neither of those problems should arise with Data Domain, though. The dedupe market is clearly established and growing, and Data Domain has led the charge. No integration is necessary in this case. There may be some integration down the road, but NetApp can sell the Data Domain dedupe boxes while it develops future products. Unlike Spinnaker, Decru and Topio, Data Domain is a public company. It has a strong organization and an accomplished sales force. And as Warmenhoven points out, NetApp already knows how to sell software wrapped in commodity hardware. The odds look good for NetApp in this case.

Another question in the wake of the deal is, will the ripple effects result in more acquisitions? It is sure to renew speculation that EMC will buy out its dedupe partner Quantum, but EMC already has the only thing from Quantum that it wants – its dedupe code. Why should it buy the entire company, unless another suitor forces it into a defensive deal?

The more likely deal would be Hewlett-Packard and Sepaton. HP already sells Sepaton’s dedupe and VTL software, and has a track record of buying companies following successful OEM relationships.

Regardless of what happens next, NetApp’s deal has made a hot tech area even more interesting.

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