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Industry watchers place bets on EMC-NetApp-Data Domain love triangle

Other than the extension of EMC’s bid for Data Domain last Friday, the NetApp / Data Domain / EMC drama has begun to simmer along at a more muted pitch than we saw during the initial bid and counter-bid process. For now, the storage industry is in a holding pattern, waiting to see who wins – and looking to place bets.

The prevailing wisdom so far is that, for all the seeming enmity between Data Domain’s management and EMC Corp., the ultimate decision lies with the shareholders, and it’s unlikely shareholders will choose NetApp mixed stock / cash deal over EMC’s all-cash bid. Some shareholders have already filed suit against the Data Domain board, saying the board failed in its responsibility to shareholders by agreeing to be acquired by NetApp.

Talk has also turned to anti-trust due diligence currently being carried out on the proposed deal by government regulators including the FTC.  According to a Reuters report last week,

The U.S. government could hinder EMC Corp’s (EMC.N) $1.8 billion bid for Data Domain Inc
(DDUP.O) as antitrust regulators are expected to scrutinize it more closely than a competing offer by NetApp Inc (NTAP.O).

While by far the bigger company, EMC is in a more precarious antitrust position than its smaller rival because EMC is the largest player in the market for so-called data reduction technology in which Data Domain specializes.

Both bids are being reviewed by the U.S. Federal Trade Commission, but antitrust experts and industry analysts say EMC’s offer could get delayed for weeks or months, while they expect NetApp’s to win quick approval.

However, storage industry analysts say it would be a stretch for antitrust laws to block an EMC acquisition. “It’s tough to unravel,” said Forrester Research analyst Stephanie Balaouras. “Given [that] dedupe will exist everywhere,  [in both] hardware and software, I think there are plenty of options.”

In the meantime, the Motley Fool published an interesting post yesterday entitled “EMC’s Just Not That Into Data Domain Anymore“:

EMC’s (NYSE: EMC) tender offer for storage efficiency expert Data Domain (Nasdaq: DDUP) was set to expire today, so the company filed an extension until July 10. Data Domain will hold its annual shareholders’ meeting in the meantime. And none of it matters.

As of last Friday, with an already-extended deadline looming large, only 0.28% of Data Duplication’s shares had been tendered to EMC’s offer. That’s tantamount to a vote of “no confidence” in the deal…. it looks like Data Domain’s owners prefer to see the competing NetApp (Nasdaq: NTAP) offer coming to fruition…EMC would have to cough up more cash to win this battle. Even then, EMC might have to resort to downright hostilities if it really wants Data Domain…That’s just not a healthy way to get hitched, unless you want to start planning the divorce party already.

Acrimony is nothing new between NetApp and EMC, of course, but the lack of interest from Data Domain shareholders as pointed out here is quite interesting. After all this, might the original news we reported on a month ago might still wind up being the story, give or take a few hundred million dollars?

Curiouser and curiouser.

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