NetApp and EMC have filed forms with the SEC detailing the timelines of their negotiations with Data Domain, which has accepted NetApp’s $1.9 billion offer while EMC’s $1.8 billion offer remains on the table.
Some highlights of the negotiations:
• Data Domain CEO Frank Slootman and NetApp CEO Dan Warmenhoven talked informally “from time to time” about their companies and the storage industry since 2006. Last November, a representative of Goldman Sachs arranged for a meeting between the two CEOs to discuss a possible “business combination” between the two. Slootman and Warmenhoven agreed the time was not right for any type of deal between the companies.
• Goldman Sachs arranged another meeting last March 17 between Slootman and NetApp president Tom Georgens to discuss “strategic opportunities” between Data Domain and NetApp. At that meeting, Slootman agreed to discuss a potential deal with the Data Domain directors. He briefed chairman Aneel Bhursi and the other directors that day, and the Data Domain board agreed to open negotiations with NetApp.
• Data Domain met with another company, referred to as “Company A,” on April 6 to discuss what the NetApp filing called “terms of a commercial relationship.” The unidentified the company is believed to be either Hitachi Data Systems or Symantec, but there were no further discussions after April 6.
• On April 27, NetApp made its first offer of cash and stock worth $22 to $23 per Data Domain share. The offer included a potential position on the NetApp board for Bhursi and a potential NetApp management role for Slootman. Data Domain’s board wanted a better financial deal.
• On May 6, after two more NetApp offers and a Data Domain counter of $26 per share in cash and stock, the companies tentatively agreed to a price of $25 per share in cash and stock – worth around $1.5 billion. The next day, an EMC board member contacted Slootman to arrange a meeting with EMC CEO Joe Tucci.
• Warmenhoven said “NetApp would not engage in a bidding contest if additional parties emerged seeking to acquire Data Domain,” according to NetApp’s filing.
• On May 7, Slootman agreed to meet Tucci May 27 in the San Francisco area, but cancelled the meeting on May 20 after the sides reached a final agreement and NetApp announced that Data Domain accepted its $1.5 billion offer. Tucci was likely referencing the cancelled meeting in his public letter to Slootman Monday, which read “We are disappointed that we were not given an opportunity to explore a business combination prior to the announcement of your proposed transaction with NetApp, particularly since I believe you should have been aware of our interest.”
• EMC representatives continued to contact Data Domain representatives after they accepted $1.5 billion offer. Data Domain reps told EMC reps they could not talk to them because of a non-solicitation clause in the merger agreement with NetApp.
• Tucci called Slootman Monday to notify him of EMC’s cash offer to Data Domain shareholders worth $30 per share or $1.8 billion. The Data Domain board met that day to review EMC’s offer, then notified NetApp they would contact EMC about its offer.
• NetApp said it would increase its offer to $30 in cash and stock – worth $1.9 billion – Tuesday, and made the offer public Wednesday morning. Data Domain’s board accepted later in the day, and EMC publicly stated its offer is still superior to NetApp’s revised offer.
Today, Data Domain’s board said it is reviewing EMC’s offer and will make a recommendation to shareholders by June 16.
Early podcast this week for scheduling reasons. There’s already been plenty of news, anyway.
Broadcom today again called on Emulex shareholders to call a special meeting, where they can discuss Broadcom’s unsolicited $764 million offers to buy the HBA vendor.
Broadcom CEO Scott McGregor made the appeal in a press release, after Emulex management and directors have repeatedly spurned its advances, filed a lawsuit trying to derail the deal, and questioned the honesty of Broadcom founders.
If holders of two-thirds of Emulex shares agree, the stockholders and Broadcom representatives can hold a meeting and vote on whether to remove and replace Emulex’s board members. Broadcom’s release also said Emulex shareholders are not obligated to vote at the meeting.
“The Emulex Board has, again, refused even to discuss our compelling offer and instead has erected sweeping structural defenses,” McGregor said in a statement. “Emulex has also resorted to costly, mudslinging litigation that is wholly irrelevant to our offer, entirely without merit and has no place in today’s prevailing standards of sound corporate governance and responsible Board conduct. These actions demonstrate that the Emulex Board is unlikely to enter into legitimate negotiations toward a transaction in the stockholders’ best interest unless Emulex stockholders take action.”
McGregor said without a special meeting, “Emulex stockholders may be denied the opportunity to act until the annual stockholder meeting, by which time Broadcom could decide to pursue an alternative path.”
Broadcom also ridiculed Emulex’s financial forecasts through 2012 as “hockey-stick” projections and labeled them “dubious” and “improbable.”
Broadcom made its offer of $9.25 per share directly to Emulex shareholders after the Emulex board turned down the offer in April.
Data Domain accepted NetApp’s latest offer worth $1.9 billion today, while EMC claimed its bid is still superior to NetApp’s.
NetApp accelerated the bidding war over the data deduplication specialist this morning by increasing its original offer of cash and stock from $1.5 billion or $25 per share after EMC an unsolicited offer Monday for $30 per share.
Data Domain, which agreed to NetApp’s May 20 offer, again agreed to be acquired by NetApp – this time for $30 per share.
“We are pleased with the revised terms of NetApp’s acquisition offer and feel it will provide great value to our shareholders and customers,” Data Domain CEO Frank Slootman said in a prepared statement.
Around the same time that Slootman was accepting NetApp’s counter, EMC CEO Joe Tucci released a statement saying EMC’s all cash offer of around $1.8 billion is the better deal for Data Domain stockholders. The shareholders will ultimately decide which offer to accept.
“EMC’s all-cash tender offer remains superior to NetApp’s proposed part-stock merger transaction,” Tucci said. “We are proceeding with our superior cash tender offer, which is not subject to any financing or due diligence contingency. We do not believe that the Data Domain stockholders will approve the merger transaction with NetApp.”
NetApp’s offer is slightly higher because it is based partly on its stock price – which changes daily — while EMC’s offer is fixed.
The revised NetApp offer consists of $16.45 per share in cash and $13.55 per share in NetApp stock based on NetApp’s Tuesday closing price of $19.34. While Wall Street analysts say NetApp needs to make an all-case offer to get Data Domain, NetApp maintains the combination of cash and stock makes its offer superior to EMC’s because of the potential for greater long-term value.
Financial analysts who follow NetApp and EMC expected NetApp to counter, but they say NetApp lacks the available cash to win a sustained bidding war with EMC.
“Why would anybody take a cash and stock deal when somebody else is offering all cash?” says Kaushik Roy of Wedbush Morgan Securities. “Besides, I would guess EMC will up its offer by a little bit.”
Aaron Rakers of Stifel Nicolaus Equity Research also expects EMC to win out. “We ultimately believe that EMC’s cash position will allow them to make an increased offer above the current $30 per share offer in order to acquire Data Domain,” he wrote in a note to clients today.
Data Domain’s stock price closed at $32.54 today, suggesting investors expect an even higher offer.
Fresh from its fire-sale acquisition of Windows CDP partner Asempra Inc., BakBone Software Inc. has released a new series of software-only versions of Asempra’s Business Continuity Appliance dubbed NetVault FASTRecover (NVFR).
BakBone VP of marketing Jeff Drescher said Asempra always shipped its software on appliances, whether the Business Continuity Server, which attached in a clustered configuration to a SAN, or the standalone Business Continuity Appliance launched earlier this year. BakBone also plans to release new appliances this summer, but this week launched new software-only deployment options for the Asempra software.
BakBone also plans additional integration between BakBone’s NetVault Backup software and FASTRecover, like controlling the export of CIFS traffic through Asempra from NetVault, and adding SQL 2008 and Microsoft SharePoint support. “There’s a lot more we can do going forward to bring the companies closer together,” he said.
But the first priority is repositioning Asempra to go after small businesses and the midmarket more aggressively, which BakBone officials said was the goal at the time of acquisition earlier this month. For those purposes, it’s introducing new configurations of Asempra’s software targeted at different market segments according to company size.
NetVault FASTRecover WorkGroup Edition includes licenses to protect 3 servers and up to 2 TB of storage; Data Center Edition covers 6 servers and 5 TB; Enterprise Edition scales beyond 6 hosts and 5 TB. Workgroup Edition is priced at $2995; Data Center Edition at $8,995; and Enterprise Edition at $19,995. This is lower than Asempra’s previous entry pricing for BCA at $30,000. Appliance versions that correspond with each of the editions will be available in July. Pricing was not yet available for the new appliances yet.
“I think that is a great idea. It allows you to get the hardware you want to use so if you are a Dell shop you can get Dell,” wrote Asempra user Derek Kruger, IT and communications supervisor for the City of Safford, Ariz., in an email to Storage Soup. “I know that a lot of the vendors are pushing the appliance angle but having a ‘black box’ that does something so critical is kind of scary.”
Google Inc.’s Search Appliance (GSA) got a facelift today with the release of version 6.0. The focus of the release was adding scalability. Google claims that racks full of the modular appliances can now centrally search up to a billion files (between four and five racks, to be exact). In support of this scale, Google is also launching new hardware for GSA called the GB-9009, based on the new R710 server from Dell and Xeon 5500 Series processors from Intel.
GSA can also be further customized in 6.0 than previous releases for enterprises. An auto-complete feature in the search box (similar to the auto-complete on Google.com) will offer suggestions to users as they’re typing search terms based on the enterprise’s internal “crowdsourcing.” Users can flag content for others to find, which Google calls “social search.” Node biasing – which weights search results according to what storage device they come from – and collection biasing – similar to node biasing, but with collections of documents – are also available for users to customize search results with 6.0.
GSA can pull search results from archiving and e-Discovery repositories including EMC Corp.’s Documentum and IBM’s FileNet, but doesn’t contain compliance workflow features e-Discovery and archiving applications usually offer. GSA product manager Cyrus Mistri said GSA can be used to search across multiple e-Discovery and archiving repositories, but the search algorithm itself is optimized and engineered to deliver the most relevant results for a given keyword rather than comprehensive results showing every instance of a keyword, which is the focus for compliance search products.
But that doesn’t mean they couldn’t offer that – centrally, at scale – and own a key chunk of the compliance archiving market right now. It’s hard to argue that’s outside Google’s focus after they spent $625 million to acquire email archiver Postini two years ago. “I would never say never, let’s put it that way,” said Mistri.
In the meantime, Enterprise Strategy Group senior analyst Brian Babineau added in an email to Storage Soup, “if customers are transitioning from file servers to multiple Sharepoint sites, we definitely think GSA can help connect those information sources. In a recent ESG SharePoint survey, 49% of Sharepoint users also leveraged GSA supporting our thesis that Sharepoint sites needed to be connected by an enterprise search solution.”
EMC today moved to outbid NetApp for Data Domain, offering $30 per share for the data depulication backup specialist – less than two weeks after NetApp offered $25 per share.
EMC’s offer is worth $1.8 billion, compared to NetApp’s $1.5 billion. Data Domain’s stock closed at $26.35 today.
In making the offer, EMC made it clear that it thinks the world of Data Domain, around a year after it struck an OEM deal with Quantum to compete with Data Domain in the target backup dedupe market.
“EMC has made this offer to acquire Data Domain for its fast-growing revenue base, its strong data protection-focused management team and sales force and its highly complementary storage software technology that will help to accelerate both companies’ ability to deliver industry-leading next-generation disk-based backup and archiving solutions for customers,” EMC said in its release announcing its offer.
EMC also made public a letter from CEO Joe Tucci to Data Domain CEO Frank Slootman, claiming EMC’s offer is better because it is a 20% premium to NetApp’s offer, an all-cash offer compared to NetApp’s cash and stock offer, and would close quicker because it is structured as a tender offer.
Tucci is also trying to tempt Slootman with the vendor’s size and scope, claiming EMC could use Data Domain to turn disk-based backup into a $1 billion business within a year. “We will maintain the senior management team under your leadership and operate Data Domain as a product division within EMC,” Tucci wrote to Slootman. “As a part of EMC, Data Domain will have access to EMC’s superior global resources and we will enhance this division with additional EMC technology, products and capital.”
Tucci also said in the letter, “We are disappointed that we were not given an opportunity to explore a business combination prior to the announcement of your proposed transaction with NetApp, particularly since I believe you should have been aware of our interest.”
Data Domain has approved NetApp’s offer although the deal isn’t expected to close until late summer. Data Domain declined comment on EMC’s offer and NetApp has not responded to a request for comment.
Mark Shirman, CEO of consulting and managed services firm GlassHouse Technologies Inc., says his company is looking to incorporate cloud storage into its architectural and IT management offerings. New offerings haven’t been formally rolled out yet, the CEO told me last Friday, but the firm already sees cloud computing taking hold among enough of its customers to be preparing to embrace it.
One thing GlassHouse won’t do, Shirman said, is hang out its own shingle as a cloud storage provider. “There are plenty of folks out there who do it – we’re looking to support our users’ infrastructures in the cloud,” he said. GlassHouse already has several remote monitoring tools at its disposal for administering customer environments. In the coming weeks, it will be “settling on a few favorites” among cloud storage providers to begin integrating its services with. However, Shirman said, “we’re not going to be trying to pick who’s going to win.”
But Shirman didn’t shy away from placing a bet on the cloud’s long-term future. “Because I drink so much of my own Kool-Aid, I can see companies morphing skills so that they’re running as service providers – our business is kind of predicated on that,” he said. But it will take quite a while for any kind of overwhelming trend to take shape, and it will begin with lower-tier, lower-priority data. “The enterprise level will see this happen a lot faster than the consumer,” he said.
My own jury is still out on this. I can envision IT becoming a utility, managed from centers of expertise the way utilities are now – most of us no longer shovel coal into our fireplaces, for example – electric companies burn massive amounts of coal at centralized plants and pipe the energy to our homes. A similar thing could be on the way for IT, substituting “data” for “energy.” That would seem to also mean, then, that the expertise that lives inside enterprises currently would migrate and consolidate at these service-provider data centers–so an IT pro would become more like a plumber or HVAC technician, someone from a third-party specialist company who arrives on-site for occasional breakfix problems.
Similarly, though Shirman saw this as more of a long shot, I can see a Geek Squad technician becoming the 21st century’s answer to the plumber or home electrician, and the home network becoming more analogous to the plumbing in a residential home – not something the resident usually sees or manually manages. This is also the vision described to me by Rackspace’s general manager for cloud storage last week.
However, I’ve been around the storage and IT industry long enough to see a few “next big things” come and go, and I’m sure they are far from the last. Given the conservatism of the enterprise storage market, the way storage administrators prize their own deep knowledge and expertise on their systems, and the sensitivity of corporate data, it also seems reasonable to see the cloud becoming one more tool added to an otherwise traditional enterprise IT toolbox.
Any thoughts from the peanut gallery?
It’s been clear from the start that Emulex management was dead set against accepting Broadcom’s $764 million to acquire the HBA and converged adapter vendor. But now it’s clear that Emulex considers any offers from Broadcom unacceptable, regardless of the price.
Emulex filed suit in Orange County Superior Court in California Friday, asking that Broadcom’s takeover attempt be halted unless it discloses all information about its “past misconduct and criminal activities” and the role Broadcom founders Henry Nicholas and Henry Samueli currently have in the company.
“Fundamentally, it is material for Emulex stockholders and employees to know they are not dealing with an honest enterprise,” Emulex said in the lawsuit.
The suit goes on to say 57.8% of Broadcom’s voting interest is controlled by former CEO Nicholas and former CTO Samueli. Federal prosecutors have charged Nicholas with drug use, and trafficking in drugs and prostitutes. He has also been indicted for fraud connected with backdating stock options. He has pleaded not guilty to all charges.
Samueli pleaded guilty to making a false statement to the U.S. Securities and Exchange Commission. He left his CTO position last year but is listed as Broadcom’s senior technical advisor in the company’s latest SEC quarterly filing.
Broadcom says the charges against its founders are irrelevant to its offer to buy Emulex, but the Emulex suit digs them up anyway. The suit lists the details of all the charges against Nicholas, Samueli and other former Broadcom employees and concludes:
“Broadcom, through these individuals and others, has engaged in drug trafficking, money laundering, multi-million dollar payoffs, death threats to silence witnesses, prostitution, conspiracy to provide narcotics to potential customers without their consent to achieve better deals, and the largest reported backdating securities fraud in corporate history.”
The suit goes on to say, “Only the tip of the iceberg has been uncovered to date …”
Broadcom offered to acquire Emulex for $9.25 per share last December. After Emulex management declined the offer, Broadcom went public with it in late April. The Emulex board rejected the offer again, prompting Broadcom to take its offer directly to Emulex shareholders, which prompted Emulex to recommend its shareholders turn down the offer as well.
Last week Emulex accused Broadcom of trying to unseat its board and replace it directors who would accept its terms.
A Broadcom spokesman said in a statement, “We think that Emulex shareholders deserve better than mud slinging and scorched-earth tactics designed to block shareholders from their ability to accept our offer.”
The Broadcom spokesman says the networking chip vendor is still trying to make the deal with Emulex.
“We had heard that some of Emulex’s largest shareholders were under the impression that Emulex’s management team was interested in holding substantive discussions regarding this transaction,” he said. “In response, representatives of Broadcom reached out to representatives of Emulex’s late last week and once again were rebuffed in our efforts to engage in a constructive dialogue with Emulex. Despite these recent moves, we remain open to holding substantive discussions to bring this transaction to a close.”
Emulex e-mailed a response to Broadcom’s statement, saying while Broadcom approached Emulex last week, “it [Broadcom] had no new information to provide, other than what they have already made public to-date.”
Those two companies along with Cisco and Salesforce.com will all hold bone marrow registration drives in the coming days to try to find a match to EMC employee Nick Glasgow, who is suffering from leukemia and needs a transplant. The 28-year old has Asian and Caucasian ancestry, and so the companies are especially seeking people of similar backgrounds to be tested for a match.
Nick’s heritage poses an obstacle to finding a suitable donor at this time, according to an EMC media advisory:
What is needed to save Nick’s life is a bone marrow donor who is a match – a monumental task given his donor has to be part Caucasian and part Asian, and the donor pool for people of mixed heritages is only 2.4% of the national database of registered donors (Compared to nearly an EIGHTY% chance if Nick was Caucasian!). Given this, his doctors indicated that there was probably a 0% chance of finding a donor from the current donor list.
EMC and Be The Match Foundation are hosting multiple donor drives across the greater Boston area, starting today:
Friday, May 29 12:30 pm – 2:30 pm – Franklin:50 Constitution Blvd, Franklin, MA (Johnson Conference Room, 3rd Floor)