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NetApp Profit Falls 15%; It Buys Data Domain for $1.5 Billion

Data storage company NetApp(NTAP Quote) said Wednesday that its fiscal fourth quarter profit fell 15% year-over-year, but announced plans to acquire rival Data Domain(DDUP Quote) for $1.5 billion in cash and stock.

The Sunnyvale, Calif.-based company reported fiscal fourth-quarter net income of $75.1 million, or 23 cents per share, a 16% decline from $89.8 million, or 26 cents per share, in the year-ago period. Excluding items, the company saw adjusted fourth-quarter profit of 31 cents per share, while revenue dropped 6% to $879.6 million.

On average, Wall Street analysts expected a profit of 23 cents per share on sales of $856.5 million.

For the full fiscal year 2009, the company earned $86.5 million, or 26 cents per share, down 72% from a profit of $309.7 million, or 86 cents per share, in the previous year. Revenue gained 3%, however, to $3.41 billion from $3.3 billion.

The bigger news to come out of NetApp's earnings call was that the company is planning to buy rival Data Domain in a $1.5 billion cash/stock deal.

NetApp agreed to pay $25 per share of DDUP, a nearly 40% premium on DDUP'sWednesday closing price of $17.91. The deal is expected to close within the next two to four months, and NetApp said it will operate Data Domain as a product line, rather than as a stand-alone company.

NetApp shares rose 68 cents, or 3.9%, in late-morning trading Thursday.

Shares of NTAP are off 52-week highs of $26 a share. The stock has technical support in the $13-$14 price area. If the shares can firm up, we see overhead resistance around the $19-$22 price levels. We like the market's reaction to the deal so far. We do not currently rate this non-dividend paying stock, but we do follow the company closely.