31 July 2010
Saturday
Two's company, three's a crowd
By Greg Cornfield | Jun 8, 2009 | 682 reads
0 comments
Facebook
LinkedIn
Digg
Email
Print
RSSThey say that two’s company and three a crowd, but it seems when this happens in the acquisition market that it can be very lucrative for one of the three parties and very expensive for another.
A few weeks ago, I wrote about the announcement that NetApp was buying Data Domain for US$1.5 billion, with a combination of cash and stock. In the same article I mentioned that, while this was taking place, EMC World was underway.
Well, it seems that EMC was not completely engrossed in their own activities. On 1 June 2009, they made their own seemingly more attractive bid for Data Domain worth US$1.8 billion in cash.
In my opinion, this was a very smart and no-lose situation for EMC. It put NetApp in a very difficult situation: either NetApp would have to increase their offer or back off -- and lose a lot of face and credibility to their largest and much bigger competitor.
Just two days later on 3 June, NetApp made a revised offer of US$1.9 billion -- again a mixture of cash and stock. This was an additional US$400 million, over 25% more than the original offer made and accepted on 20 May 2009.
As of now, the Data Domain board has accepted the revised NetApp offer but this still has to get final approval from the shareholders.
The big winners so far in this bidding war are the Data Domain shareholders. On 16 March 2009, Data Domain shares was selling for $10.24. It closed at $32.59 on 3 June. A 300% increase!
The loser would seem to be NetApp. Although they appear to have acquired the company, subject to final shareholder approval, they had to pay an extra US$400 million.
As for EMC -- who knows if they really wanted Data Domain? There would have been some overlap with their current products. Or maybe they just wanted to push up the price that NetApp had to pay.
Although I have given EMC a hard time in the past in this column, I have nothing but admiration for their business acumen!
Please feel free to post comments and feedback, I welcome and encourage an active discussion. If you just want to talk direct or have any topics you would like me to mention then e-mail me at gcornfield@questexasia.com.
If you want to subscribe to the RSS feed, here is the link: A Byte of Knowledge.
About the author
Greg Cornfield runs a management consultancy firm based in Hong Kong. He has 40 years' experience in the IT industry. Most recently he was the Asia Pacific Vice President for COPAN Systems (one of the early developers of MAID technology). Prior to COPAN, he was Executive Vice President and General Manager for Hitachi Data Systems' Asia Pacific and Latin America business. Prior to that, he was an Advisory Systems Engineer at IBM.
