Drowning in data, dying for information

Ok, so I swiped that off from the original “water, water everywhere but not a drop to drink” Samuel Taylor Coleridge poem “The Rhyme of the Ancient Mariner” in which sailors on board a ship where without water to drink despite the fact they were surrounded by a sea of water.

In the same token, companies have successfully figured out how to capture as much data as they could ever need. The problem is interpreting the data to mean something.

One industry that is trying to cope with this issue is the “legal” industry where until recently the fight in the ediscovery solution suite was pretty much among small niche layers.

As many should know by now storage gargantuan EMC took a bite of the ediscovery market with the acquisition of Kazeon. EMC said the acquisition gives it an “end-to-end, in-house d-discovery and litigation readiness solution”.

This is bad news for Kazeon competitors, Iron Mountain, Autonomy, Clearwell Systems and StoredIQ. The latter because it is an OEM partner to EMC.

The two competitor that just might have to start shopping for an OEM partner in this space is NetApp, which partnered with Kazeon in October 2005.

Is there a pattern here?

 

Tech love triangle

On May 20 2009 NetApp offered to buy Data Domain (DD) for $25 per DD share. It all seemed a natural fit. NetApp needed a robust data deduplication solution that fits well with its target of SME (ok, more the mid-market than the small enterprises – but definitions of what constitutes a SME varies by country or region). NetApp acquired Alacritus in April 2005 for its virtual tape library technology. Speculation abounds this will be thrown out in favor of DD’s technology.

For its part, Data Domain needed the global reach that NetApp had to offer.

Greg Cornfield noted that this would give EMC (with its acquisition of Avamar in 2007 for $165M) a run for its money (http://www.searchstorageasia.com/content/netapp-buy-data-domain). Other industry bloggers

On June 1, EMC did up the ante with EMC CEO, Joe Tucci, holding informal talks with Frank Slootman, Data Domain CEO, followed by a letter of offer. The $30 per share cash offer by EMC certainly is more appealing than the cash + stock offer by NetApp.

But the story doesn’t end there. As with any romance novel, there is a twist in the plot and a counter offer by NetApp followed the EMC bid.

Why the interest in Data Domain? DD’s main claim to fame is its leadership positioning in the data deduplication business. NetApp desperately needs it to enhance its offering. EMC could do well to add the strength of the DD technology to its portfolio of offerings. EMC’s current offering is a combo of Quantum (OEMed) technology and the Avamar acquisition.

Gartner estimates that about 30% of companies have deployed some form of data de-duplication. Data deduplication allows companies to reduce data storage requirements anywhere up to 30:1. The dollar savings appeals to almost everyone with a growing storage farm regardless of prevailing market conditions.

Gigaom’s Stacey Higginbotham thinks EMC will fight back. EMC is doing this to protect its turf and stop a rival from eating into it’s (EMC) market.

Ryan Hutchinson of Lazard Capital believes that EMC is doing this as defensive as well as offensive. EMC has the cash to buy Data Domain at a price that would certainly hurt NetApp (even if the latter is the final winner). EMC has a cash hoard of $9B (cash plus long-term investments) relatived to NetApp’s $2.6 billion (cash and short-term investments).

At any rate, the discussion appears to be mute at this point. Data Domain and NetApp have published a new press release to indicate that they have “entered into a revised acquisition agreement” valued at $1.9B or $30 cash and stock.

Is the deal over? Outside of approvals and due diligence – maybe. Would EMC counter back? They certainly got the money. Broadpoint AmTech analyst Brian Marshall seems to think EMC can still come back to the table with a higher bid if only to keep competition from getting their hands on DD’s technology.

What’s weird about all this is that NetApp’s share price is about US$18 compared to around US$32 for Data Domain. For the life of me I can never figure out how stock valuations work.