Data Domain, for its part, is getting access to NetApp's larger sales force and also the credibility of working with an established storage player.
Investors responded positively to the deal Thursday, pushing NetApp's shares up 66 cents, or 3.81%, to $18.00. Data Domain's stock rose even higher, surging $6.25, or 34.9%, to $24.16, despite a broader slump in tech stocks that saw the Nasdaq slip 1.93%.
NetApp, which also reported solid fourth-quarter results after market close, nonetheless faces the challenge of swallowing a major acquisition.
"Deal size is hefty, and we need to better quantify potential synergies," wrote Jefferies & Company's Choi, who maintained his NetApp "hold" rating and $18 price target.NetApp has not revealed his plans for Data Domain's 827 employees, although Warmenhoven says that some areas will be left untouched. The CEO explained that he wants to keep Data Domain's sales and development infrastructure in place, but added that there will likely be overlap in other parts of the business. "Certainly, facilities, infrastructure, tools, all those things are areas that we are going to look at more closely," he said. "But we've got no plans here today to reduce the development capacity of that organization or the sales capacity." Warmenhoven confirmed that he intends to operate Data Domain as a product line with its own management and development organization within NetApp's product operations business. Located close to each other in Silicon Valley, Warmenhoven said that the there are already plenty of similarities between the two firms, which both use hardware from Xyratex (XRTX) in their storage products.