EMC - NetApp Fight Looks Like The Archie Comics

I don’t think there’s another industry that sexualizes mergers and acquisitions quite like IT.  You wouldn’t think anyone would characterize the competition between EMC and NetApp over data deduplication vendor Data Domain as a “love triangle,” as veteran storage reporter Chris Priemesberger did, but that’s not the half of it.

The hyper-professional Stacey Higginbotham at GigaOm compared the battle to “Paul McCartney and Michael Jackson fighting over a girl.” Even Enterprise Strategy Group analyst Steve Duplessie compared the bidding war to “two idiots fighting over a girl even after the girl left the dance… Everyone Loses. Except the girl.” As I wrote yesterday, EMC’s attempt to get between NetApp and Data Domain is as much personal as business. Thankfully, no one’s called it a catfight — at least not yet. But maybe there’s something to this love triangle analogy after all.

Especially if Duplessie is to be believed, neither EMC nor NetApp stands to gain as much by winning as they stand to lose… by winning. Data deduplication is a hot niche in the storage industry because it helps strip out extraneous bits and bytes that cost customers dollars and cents to store, and also helps reduce the size of the haystack that legal beagles have to sniff through when ferreting out possible evidence. But forking out close to $2 billion for an iffy proposition doesn’t make much sense, unless the bidding is being driven by that most troubling of hormones, testosterone.

As Duplessie wrote, NetApp could be letting itself in for a very expensive boat anchor:

This is super high-risk.  The deal went from $750M cash - roughly 20% and stock to what will end up being at least $2B all cash.  Will or can NetApp really afford to lose 50%+ of its operating cash?

EMC vice president Chuck Hollis justified the bid on his blog as a strategic imperative: “EMC is building a very broad portfolio of data deduplication technologies, just as we’ve done in other areas we think are very strategic.”

But his loyal readers weren’t buying, and one commenter nailed the fact that EMC was simply trying to keep Data Domain out of its rival’s arms: “If you’re going to be scoundrels in business at least be honest about it, you’re not fooling anyone by lying.”

Love triangle? I’m thinking it’s more like the Archie comic books. While Archie and Reginald were constantly vying for Veronica’s affections, it wasn’t lost on loyal readers that Archie was a lot happier with Veronica’s blond alter ego, Betty. In this case, whichever company loses out on the Data Domain deal could end up in the arms of Exagrid, a vendor in the lower end of the market. Again quoting Duplessie, “NetApp, or EMC could probably snap up Exagrid for a few gazillion bucks less and be in just as good a position to drive value as they would with Data Domain, truth be told. ”

In any case, the hijinx in this space are just beginning, because neither HP nor Hitachi can afford to watch their rivals grow bigger at their expense much longer.

[Image source: GamerTell]