DAN: | Hi, Im Dan Warmenhoven and Im the Chairman and Chief Executive Officer of NetApp Inc. On May 20th of 2009 NetApp announced our intention to acquire Data Domain, a transaction valued at about one and a half billion dollars in both cash and stock. Now while the transaction is subject to regulatory and customary approvals, we would hope to close in the next 60 to 120 days. During that period well have to operate independently. But my goal today is to share with you the background rationale and some of the excitement we feel about this combination. | |
I thought we should start by looking back at NetApps history. Fifteen years ago when NetApp was founded, right from the very beginning we were focused on the notion of helping customers in the areas of backup and data protection and recovery. We wanted then to minimize the frequency of backups to simplify their operations and make data restoration much easier and quicker. And so Snapshot was introduced in the first systems in 1994. Later, earlier in this decade, we pioneered the notion of disk-to-disk backup and archive. We introduced a product line based on ATA disk drives called NearStore, allowed customers to do asymmetric mirroring between high performance systems and low cost systems. We created technologies called SnapVault and SnapLock and Open Systems SnapVault. Our solutions were focused on helping customers who used NetApp primary storage and many of them even took it to the extreme of eliminating any dependency on tape. However, we never really had a terrific solution for customers who use non-NetApp primary storage and thats the issue that Data Domain addresses. They have a terrific solution for customers who use other vendors storage as primary data storage. They have taken a great technology, basically the notion of in-stream deduplication, taken that technology into a terrific product line thats got the same kind of attributes as NetApps products and the simplicity of an appliance, and its been delivered and taken to market and supported by an outstanding team. Great technology, great product, great team. And these are all very complementary with what NetApp provides, consistent with our themes that weve been advocating over the last decade. Weve got a terrific philosophical alignment. We both want to help customers reduce the use of tape, using appliance-like solutions that are simple and easy to use. The addition of Data Domain complements NetApps leadership in storage efficiency. The 2009 Info Pro Survey rated NetApp number one in online data reduction and deduplication. That same survey rated Data Domain number one |
in backup data reduction and deduplication. So you can see the combination will be very powerful. | ||
I should give you a few background facts on Data Domain. Their fiscal year, which ends at the end of the calendar year, in 2008 they were $274 million in revenue. They grew by 122% over the prior year. This past quarter, which ended in March, they were $79 million in revenue, approximately 80% of which came from the U.S. Their headquarters is very close to us in Santa Clara, as are most of their development locations in places like Raleigh, North Carolina, RTP. They have about 825 employees. So if you look at it in revenue or look at it in employees, they are roughly about 10% the size of NetApp today but their culture is very much like NetApp. They are very innovative, theyre very high energy, theyre very customer focused and, just like us, they love to beat EMC. | ||
This expands the opportunity we think for both companies. NetApp has the market reach to expand the delivery of Data Domains portfolio to international markets and more enterprise customers. This past quarter Data Domains revenues were only 21% international. NetApps are more than 50%. So clearly we can take their product into our existing channels and, and partner networks outside the U.S. They also add a complementary high growth business to us, accelerating our combined growth rates, and we have the opportunity to add value to customers who dont use NetApp primary storage today or divide their purchases between NetApp and another vendor. We hope we can continue to acquire new customer accounts with their technology. They have done a fabulous job of new, new customer acquisition, and we would hope to continue that or even accelerate it. At the same time, well provide the Data Domain product line to current NetApp customers. | ||
Relative to partners, we think this expands our partners opportunities as well. We will in fact rationalize channel programs but we think we have at NetApp a much more mature and developed channel program than Data Domain. So well move them to, if you will, to the NetApp model and NetApp partners will gain access to the Data Domain products. We also have an opportunity to scale up Data Domain customers to port, consolidation of parts distribution and third party maintenance around the globe. | ||
So some of the benefits to our customers and partners are, are as follows. First of all, the Data Domain customers, they get the NetApp commitment to the future of the Data Domain product line and they get access to NetApps global sales, support and services. NetApps customers get access to broader disk based backup portfolio products. Our partners get the access to the Data Domain products and to our reseller channel with a much more robust channel program. So I think its a win, win, win for everybody involved. | ||
I have a message now to employees of both companies. Over the next 60 to 120 days, until weve reached the final approvals and are able to close this, this |
merger, we are still two separate and independent companies and will have to operate that way until the deal closes. If youre a NetApp employee, please reach out to the Data Domain employees and embrace them as part of our great-place-to-work culture when you can. And if youre a Data Domain employee, I want you to know how excited I am about having you join the NetApp family and were all committed to making the most of what youve developed over the last few years. Im excited on many different dimensions. I hope youre as excited as I am. Thank you. |