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June 01, 2009

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John J

EMC can't acquire DDUP; NTAP has a no compete.

Also, just listened to Tucci's webcast on this; omg! has he ever presented before?

TimC

Right, so you didn't buy Quantum for a fraction of the price why? Even with their debt they'd be cheaper than the offer for Data Domain.

If you're going to be scoundrels in business at least be honest about it, you're not fooling anyone by lying.

Jonathan Donaldson

Chuck,

You can't have it both ways...Is a Data Domain purchase good or bad?

See: http://chucksblog.emc.com/chucks_blog/2009/05/emc-world-wrap-up.html

Is De-dupe a point feature or a pervasive one? These two posts are so hypocritical it should be net to the definition in the dictionary....

James

I don't really think that a "no compete" will stop a better bid - it just means that there are penalties to pay - I think I remember about $58M but I could be wrong.

This is an intriguing move and the reaction above is an indication that NTAP won't be happy - if they are really that keen, I guess they will come back to the table. And there really is no "scoundrel" going on here. These responses smack of a little tantrum because you can't have it your own way - grow up and understand the real world - it's competitive sometimes!

Paul P

Ok,

So Chuck what you are saying is:

"This acquisiition says a lot about how [EMC] views itself and its future prospects...."

"Single-purpose dedupe products seem to be on an inevitable death spiral from a business model perspective.."

"Sure, there's a pocket of opportunity to be mined, but the long term prospects for being a pure-play dedupe vendor seem unappealing at best.."

Geoff Mitchell

Chuck,
A couple of issues with your commentary here.
Firstly, is dedup a feature or a product/platform? You've been vocal on this before and $1.8 billion seems a lot to pay for a mere feature, don't you think?

Secondly, your analysis that this would plug into - and raise the bar for - EMC's overall portfolio is valid, but this argument could have been made 2 weeks ago, or a year ago.
This isn't that move. This is purely a defensive move to shore up EMC against Network Appliance in dedup, an area where EMC is presently exposed.

SANd Man

'Surprise play' indeed! This is classic, classic stuff, Chuck. $1.8B for a "feature". EMC obviously caught flat-footed, thus this reactive acquisition play.

Chuck Hollis

Hi @all

A couple of themes I'd like to respond to.

One set of people seem to take umbrage to EMC's past description of deduplication as feature rather than a product, pointing to our acquisition intentions as some sort of evidence that we being inconsistent or untruthful.

As I tried to explain in my post above, dedupe technology shows up in many forms and many places. Paying for a cool dedupe technology to join the other ones EMC already owns, using it in different places, exploiting other synergies -- it all makes sense to me.

Let's talk about security and encryption for a moment. Encryption shows up everywhere in the stack in many forms (a feature), but key management is a product. There's a synergy there.

Data deduplication is a feature -- it shows up in many places and many forms, including simple-to-use backup appliances. Placing the right data at the right place at the right time (e.g. Networker, SourceOne, Avamar, Documentum, et. al.) is not a feature, it's a product.

I don't know if that's enough of an explanation to assuage people's natural skepticism, but I thought I'd give it a try.

Second, there are people who believe we could have done something with Quantum for much cheaper. I would respond to these people that M&A is not a monogamous game -- we can have multiple, different relationships with multiple, differentiated technology suppliers, so I'd encourage you to broaden your lens just a bit.

Finally, there are those that are outraged that EMC would play hardball in the M&A world, given that NetApp had already made their intentions clear. To these people, I would gently suggest that they need to better understand the dynamic realities of an intensely competitive industry segment.

I hope this helped a bit ...

-- Chuck

Charles Hockenbarger

Chuck:

Long time no talk.

I think the one element that's missing here in your article is that the future of target-based dedupe is short term, as is all VTL-type technology. It's a stop-gap measure designed to overcome the clear disadvantages of tape. As CDP technology matures and works it's way more and more into the array, bandwidth gets less expensive (or the price is mitigated by better compression / dedupe algorithms), and better automated archiving software comes into play, "backup" as we know it is dead, IMHO.

While $1.8B is steep for a feature, it's the best code on the market for that feature, and can easily be integrated into other technologies (as you imply EMC has done with SMARTS, RSA, etc.). The one question I have is why didn't you guys do this earlier? I have to agree with the flat-footed comment above. While I don't agree that it is a purely defensive move, this acquisition should have been made a long time ago.

Of course, if in a cynical moment by Joe and the Board, it IS a purely defensive move, remember, defense wins championships.

Paul P

No Chuck,

The issue is not what EMC said, its what you said only recently. Disparaging of Both NetApp and Data Domain...

Those previous remarks, like for example: "Single-purpose dedupe products seem to be on an inevitable death spiral from a business model perspective.."
are all of sudden not applicable because EMC might resell them...?

Heh, how does this make sense.


Chuck Hollis

@Paul -- it seems you have an axe to grind, but I'll try explaining the logic a third time.

DDUP by itself is a single-feature product company, and I stand by my earlier comments.

DDUP acquired by an industry leader such as EMC with a broad complementary technology portfolio, global distribution and support and an extensive partner ecosystem -- well, that's an entirely different proposition, isn't it?

Use your imagination as to the potential opportunities given the new context.

-- Chuck

Chuck Hollis

Hello Charles!

I agree with you, many of us can see "the end of backup" as we know it before too long -- all the pieces are coming together, but old habits will take a long time to change, won't they?

Thanks for the comment ...

-- Chuck

shiningarts

It is all a chess game when you consider technology M&A. If your competitor moves into a strategic position that would compromise your interests, you may need to out-flank them to block their move. Whether you like it or not, the current difficult economic situation will accelerate M&A further. As far as Dedup is concerned, EMC may need to shore up its capability, whether it is a feature product or not. Although there may not be a silver bullet, Dedup technology is extremely important not only for storage but for almost everything, including content management. In these days, we can not dwell in each silo complacently. It is extremely important to orchestrate your in-house products to work with each other homogeneously in order to meet the demands of the ever changing topology of technology.

Jay Boyd

In my view EMC is cleverly playing NetApp by forcing them to substantially increase their bid, thereby consuming large amounts of their outstanding cash balance. EMC is the Johnny Chan of this poker game, raising NetApp and forcing them to increase the bet in order to stay in the hand. I speculate that EMC will raise NetApp slightly to $2.0B or so and force NetApp to again increase its bet. Brilliant EMC, Brilliant!!

Knabta

So now what?

EMC lost out to Netapp on DDUP. Is it this comment or the may 20 that matters?

You write a great blogg Chuck, but what is going on at EMC? Suddenly all is about cloud/vmware and vmax and no core EMC rep knows anything about vmware and vmax is not sold through channels. One the one side you have a very channel driven product that makes HP and IBM look good and on the other you have products the channel don't touch?

Is EMC nearing its "üntergang?" and believing its own hype?
http://www.youtube.com/watch?v=pDSR6QQX1ZQ

James

@Knabta - "EMC lost out to Netapp on DDUP". I think you are being a little premature. Do you really think this is over? EMC may not end up being the eventual owner of DDUP - but I certainly don't think that NTAP will be. Seems that there is some boardroom shenanigans going on between DDUP and NTAP - unfortunately, they don't get to decide. It's all about the shareholders - oh, and federal and state law of course! We haven't seen the other big payers make a move yet. As someone said - it's just an expensive game of chess really.

shiningarts

Since NetApp has matched EMC's offer as predicted, I think EMC will up it again to $35 at this time as reported by WSJ, http://online.wsj.com/article/BT-CO-20090603-711759.html , which compares the situation to the VMWare acquistion situation before. I'd concur with WSJ's view on this. Dedup is not an easy mechanism to tackle just as virtualization is not and Data Domain has been doing it somewhat better than any other players including EMC. This acquisition may be as big as the virtualization one because the technology is needed in every aspect of data processing including storage. EMC’s track record with anticipating the market is very good as evidenced by, among other things, the 2004 acquisition of VMWare. I believe they see something big in play with Dedup, and I am inclined to think they know their stuff. I think, however, that EMCs focus is on strengthening their portfolio as opposed to focusing on eliminating other players.

Andi Ulrich

@Knabta - Beside your argumentation your illustration with the youtube post is more than questionable. Here are germans and swiss guys in the blog...

shiningarts

I don’t know what it takes for a company to be listed as the top company to work for in the leading trade magazine. I bet that if you give free lunch, coffee, free green cars (say a Prius) for errands, and, oh yeah, a free massage as touted by one of the leading search engine companies from the left coast. Those amenities tend to fade as companies mature, though, because the corporate management figures out that being a cool company to work for does not necessarily translate into long term viability of the company in a competitive business environment. I bet NetApp is a cool company like that. When I was working for EMC, it wasn’t necessarily a “cool company”, it was a tough and competitive working environment. But it had and still has staying power, which is very cool for an employee in a difficult economy. Being a cool company, however, doesn’t give a right to get first dibs in the acquisition game NetApp is in right now. You have to have a sound and comprehensive vision beyond your storage silo because the technology is about to change in a big way. In this ever changing and competitive technology environment, being a “cool company” won’t take you through the turbulence. And just because EMC isn’t a “cool company” doesn’t mean it isn’t equally qualified to compete on the free playing field. EMC has as much right to play as NetApp does. Besides, the history suggests the acquisition will favor EMC rather than NetApp. Please read these articles:

http://www.computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=knowledge_center&articleId=9133949&taxonomyId=1&intsrc=kc_top

http://www.theregister.co.uk/2009/05/28/emc_buys_configuresoft/

Recently, one of top EMC storage managers went over to HP as Chuck’s Blog mentioned:

http://chucksblog.emc.com/chucks_blog/2009/04/moving-on.html

It is interesting he is barred from working in the storage business until next year:

http://www.theregister.co.uk/2009/06/03/emc_wins_re_donatelli/

Regardless of the outcome of the acquisition contest between EMC and NetApp, perhaps, HP may be ready to jump into the fray to acquire NetApp sooner rather than later—maybe that’s why they courted the former EMC storage guy. If this occurs, the stage for a greater technology consolidation will officially start. What would be the moves of others such as IBM, Cisco, or the like? If HP is about to venture into its ambitious storage stack--a surprise play indeed--it would be more than a battle of DeDup. Maybe a battle of DeHP or DeEMC depending on which side of fence you sit.

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Chuck Hollis


  • Chuck Hollis
    Chief Strategist, VMware Storage and Availability Business Unit
    @chuckhollis

    Chuck works for VMware, and is deeply embroiled in all things software-defined storage these days.

    Previously, he was with EMC for 18 years, most of them great.

    He enjoys speaking to customer and industry audiences about a variety of technology topics, and -- of course -- enjoys blogging.

    Chuck lives in Holliston, MA with his wife, three kids and four dogs when he's not traveling. In his spare time, Chuck is working on his second career as an aging rock musician.

    Warning: do not buy him a drink when there is a piano nearby.
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