NetApp bulks up on a $1.5 billion deal

Posted May 21st 2009 9:15AM by Tom Taulli
Filed under: Earnings Reports, Cisco Systems (CSCO), Hewlett-Packard (HPQ), International Business Machines (IBM), Technology

For NetApp (NASDAQ: NTAP), yesterday was fairly eventful. Not only did the company announce its Q4 earnings but also a $1.5 billion deal to purchase rival storage maker, Data Domain (NASDAQ: DDUP). The transaction comes to $25 per share.

No doubt, NetApp needs to find growth, as CFOs tighten information technology (IT) budgets. Keep in mind that Q4 revenues fell 6.2% to $879.6 million.

And Data Domain is definitely a good pick. The company is a top player in the high-growth data de-duplication space.
For example, in Q1 Data Domain reported revenues of $79 million, up 50% over the past year. There were 218 new customers.

However, the price tag isn't cheap, coming to 5X revenues (for the past 12 months). But with NetApp's massive distribution footprint, there should be much more traction for Data Domain products -- especially in foreign markets.

Interestingly enough, NetApp may ultimately be a buyout target as well. Some of the possible suitors include Cisco (NASDAQ: CSCO), Hewlett-Packard (NYSE: HPQ), and IBM (NYSE: IBM).

Tom Taulli is the author of various books, including The Complete M&A Handbook and the founder of BizEquity, a free online business valuation tool for small businesses. You can reach him at his personal blog.

Tags: Data Domain, DDUP, inthenews, MA, NetApp, NTAP