Add to CartStorage continues to be an important aspect of our coverage of information management. Although the raw disks don’t interest us much, the applications and infrastructure on top certainly do. One of the most intriguing names in the space is Data Domain (NASDAQ: DDUP - $24). We last published on the company exactly one year ago around the time of their IPO. We put an intrinsic value (IV) on the stock at the time of $23 and after trading between $20 and $40 during the last twelve months, the shares have settled right into our estimate.
During the last year the company has executed very well and all indications are that enterprise customers continue to focus on data deduplication (Dedup) in general and Data Domain in particular. The hype surrounding the IPO has diminished and it’s a good time to evaluate the company from a longer-term perspective.
The major questions we get from clients regarding Data Domain are:
1. Won’t similar capabilities from all the existing storage vendors like EMC, IBM, Quantum and so
on be the undoing of this company over time?
2. Isn’t data deduplication more a feature than a company?
3. The shares are pricey. What’s the right valuation?
4. They are an obvious acquisition target. Who is the most likely acquirer?
Taking the first two together we have gathered that deduplication is proving to be more durable as a category than many at first believed. The main reason is that data is distributed across many different
brands of storage endpoints and is consumed by a wide variety of applications. Dedup solutions from storage vendors tend to work in their local environment but fail to fully address the more global scope of the problem. The difference in value between a local solution and global one is profound. A more subtle point is that storage vendors themselves really don’t want to succeed too well because they basically want to sell more storage.
Our research partners at TheInfoPro (TIP) have deep survey data on enterprise plans surrounding the storage market. By examining the vendor profile and technology investment plans of large enterprises we can get an accurate picture of the position that Data Domain has in the core market. First off, the overall position for Data Domain is very positive, as shown in the TIP Vendor Profile summary below.