NetApp may be target after failed Data Domain bid

By Jim Finkle and Anupreeta Das

BOSTON/NEW YORK (Reuters) - NetApp Inc (NTAP.O) may itself become an acquisition target after rival EMC Corp foiled its effort to buy Data Domain Inc (DDUP.O), a niche player in the $20 billion-a-year data storage equipment market.

Technology giant IBM (IBM.N) is the most likely buyer, though Cisco Systems Inc (CSCO.O), Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N) may also be interested in NetApp.

If the company were sold, it would go for between $8 billion and $10 billion, a premium to its current market value of about $6.4 billion, according to a West Coast banker who advises many of these companies and declined to be identified because the matter is private.

NetApp, whose revenue is forecast to grow 2 percent this year to $3.5 billion, had looked to Data Domain to accelerate sales growth and enhance its product line.

Potential buyers would use NetApp to do the same on a larger scale. The Sunnyvale, California, company is the biggest player in the market for mid-range storage equipment, an area that is growing faster than high-end equipment, which EMC and IBM dominate.

"What better time to take advantage of a company like NetApp than in an economy like we have now? Perfect timing," said Joe Martins, managing director of Data Mobility Group, a research firm that follows the storage industry.

EMC, the No. 1 maker of data storage equipment, won the bidding for Data Domain on Wednesday with a $2.4 billion offer for the Santa Clara, California, company, whose sales are projected to soar 34 percent this year to $367 million, according to Reuters Estimates.

A spokeswoman for NetApp declined to comment on whether it is a target. Chief Executive Dan Warmenhoven said he would return to business as usual. "We remain highly confident in our already-compelling strategic plan, market opportunities and competitive strengths," he said in a statement on Wednesday.