EMC Corp intends to increase its bid for Data Domain Inc to pip rival suitor NetApp Inc, to the post. NetApp could offer as much as $35 a share according to sources in the know.
The top maker of data storage equipment, EMC, has put in an offer for $30 a share, amounting to $1.8 billion cash, for Data Domain but the company preferred to go with NetApp following NetApp revising its offer upward from $25 a share to match EMC's price.
EMC's is looking to either win Data Domain or at least up the stakes to a point where the smaller rival will find the acquisition too expensive that would end up weakening its finances.
According to analysts, EMC is in a stronger position going by its balance sheet and could easily outbid NetApp but there remains a possibility of antitrust regulators queering EMC pitch because of EMC's leading position in the storage equipment market.
According to another source, EMC holds about $7.1 billion in cash, including $4 billion in the US and could go up to $34 to $35 per share.
Both EMC and NetApp play in the same domain making hardware and software that allows companies to store, manage and back up their data. They are interested in Data Domain's technology because it eliminates duplicate data during back-up processes which lets companies save top dollar in costly storage space.
The board of Data Domain, last week recommended the NetApp's offer cash-and-stock offer saying it offered better value for shareholders. According to NetApp, the stock component of it offer will allow Data Domain shareholders to benefit from the combined growth of the companies.
A formal recommendation on EMC's bid is expected from the Data Domain board on 16 June. A date for a shareholder vote on the NetApp deal is awaited.
Investors, meanwhile, are expecting a bidding war, a rare phenomenon in the tech sector to push shares up. Shares of Data Domain have been trading at $33 since EMC made a counter offer on 2 June.
Data Domain stock rose 3.3 per cent to $34.35 on Nasdaq in Friday afternoon trading while NetApp shares fell 1.8 per cent at $19.57 and EMC went down 0.2 per cent at $13.05.
NetApp, according to analysts seems to be relying on the possibility of antitrust regulators crying foul on an EMC-Data Domain tango. NetApp says its products are more complementary with the back-up technology of Data Domain as compared with EMC's products.
According to a spokesman for EMC, the company expected no antitrust delay and the anti-trust focus hinted of desperation on NetApp's part.
According to analysts, NetApp's claim had some merit as EMC and Data Domain are two top players in the estimated $3 billion market for deduplication software. Other providers include IBM, Symantec Corp and Quantum Corp, which is in partnership with EMC.
They say the NetApp technology is different as it deals with redundant data before it is backed up by searching for duplicate date in ordinary storage systems.