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Is dedupe recession-proof?

With the global economy crumbling, Data Domain is the rare company that not only exceeded its financial expectations for last quarter but actually raised its forecast for this quarter.

Data Domain’s third-quarter revenue of $75 million was up 134 percent from last year, and earned the company $3.2 million in net income. Data Domain expects revenue  this quarter to be between $80 million to $84 million and its estimate for the full year is between $269 million and $273 million, up from the previous estimate of $250 million to $255 million.

The data dedupe specialist proved that curbing data growth is a high priority in data centers these days even if companies are looking to trim storage budgets. Quantum also cited sales of its deduplication products as a highlight in an overall disappointing quarter, and EMC execs said on their earnings call this week that their Avamar host-based dedupe is selling well although they made no mention of the re-branded Quantum products they sell.

But while Quantum, EMC and others say they saw a spending slowdown in September and October, Data Domain execs say its full speed ahead. Data Domain CEO Frank Slootman said his company’s new bigger – and more expensive – DD690 system has been well received, and customers are moving beyond just using dedupe to for backup. Slootman said Data Domain systems are increasingly being used for nearline (archive) data.

“We saw normal spending patterns and behavior, even in the last week of September when all hell was breaking loose,” Slootman said. “If you didn’t watch CNBC, you wouldn’t know something was wrong with the world.”

Data Domain reported 10 deals of more than $1 million and two of more than $5 million, and the average deal grew to $131,700 from $108,000 the previous quarter. Slootman said even financial services companies are buying “because of the much bigger faster product we’re selling.”

Quantum also has a bigger dedupe product out – the DXi750 – and CEO Rick Belluzzo said it spurred an increase in disk and software revenue despite an overall loss of $3 million due to declining tape sales.

“The DXi7500 has tended to take us into bigger accounts and bigger deals, but those become a little harder to close,” Belluzzo said. “It’s clear the global financial crisis impacted our ability to close business at end of the quarter. We saw numerous sizeable deals fall out of the quarter, particularly on the DXi7500.”

Belluzzo said he hopes most of those big deals will close, and several already have. Quantum is clearly betting its future on disk backup fueled by deduplication and replication rather than its legacy tape business. Belluzzo said the vendor is also looking for more partners to license its dedupe IP as EMC has. One financial analyst says Quantum has a deal in the works with Dell. Dell hasn’t done much with dedupe yet, but senior manager of Dell storage Erick Endebrock  said on a conference call with reporters today there will be a dedup announcement “in the near future.”

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