I am trying to put EMC’s price for Data Domain (DDup) into perspective but am having difficulty. According to InfoWorld article on EMC acquisitions ’03-’06 and some other research this $2.2B$2.4B is more money (not inflation adjusted) than anything in EMC’s previous acquisition history. The only thing that comes close was the RSA acquisition for $2.1B in ’06.
VMware only cost EMC $625M and has been by all accounts, very successful being spun out of EMC in an IPO and currently shows a market cap of ~$10.2B. Documentum cost $1.7B and Legato only cost $1.3B both of which are still within EMC.
Something has happened here, in a recession valuations are supposed to be more realistic not less realistic. At Data Domain’s TTM revenues ($300.5M) this will take over 7 years to breakeven on a straightline view. If one considers WACC (weighted average cost of capital) it looks much worse. Looking at DDup’s earnings makes it look even worse.
Other than fire up EMC’s marketing and sales engine to sell more DDup products, what else can EMC do to gain a better return on it’s DDup acquisition? (not in order)
- Move EMC’s current Disk Libraries to DDup technology and let go of Quantum-FalconStor OEM agreements and/or abandon the current DL product line and substitute Ddup
- Incorporate DDup technology into Legato Networker for target deduplication applications
- Incorporate DDup technology into Mozy and Atmos
- Incorporate DDup technology into Documentum
- Incorporate DDup technology into Centera and Celerra
Can EMC selling DDup products and doing all this to better its technology double the revenue earnings and savings derived from DDup products and technology – maybe. But the incorporation of DDup into Centera and Celerra could just as easily decrease EMC revenues profits from the storage capacity lost depending on the relative price differences.
I figure the Disk Library, Legato, and Mozy integrations would be first on anyone’s list. Atmos next, and Celerra-Centera last.
As for what to add to DDup’s product line. Possibly additions are around the top end and the bottom end. DDup has been moving up market of late and integration with EMC DL might just help take it there. Down market, there is a potential market of small businesses that might want to use DDup technology at the right price point.
Not sure if the money paid for Ddup still makes sense but at least it begins to look better…
