DEALTALK-NetApp may be target after failed Data Domain bid

* NetApp may be takeover target after losing Data Domain

* IBM, HP most likely buyers; Cisco, Dell also possible

By Jim Finkle and Anupreeta Das

BOSTON/NEW YORK, July 10 (Reuters) - NetApp Inc (NTAP.O) may itself become an acquisition target after rival EMC Corp foiled its effort to buy Data Domain Inc (DDUP.O), a niche player in the $20 billion-a-year data storage equipment market.

Technology giant IBM (IBM.N) is the most likely buyer, though Cisco Systems Inc (CSCO.O), Dell Inc (DELL.O) and Hewlett-Packard Co (HPQ.N) may also be interested in NetApp.

If the company were sold, it would go for between $8 billion and $10 billion, a premium to its current market value of about $6.4 billion, according to a West Coast banker who advises many of these companies and declined to be identified because the matter is private.

NetApp, whose revenue is forecast to grow 2 percent this year to $3.5 billion, had looked to Data Domain to accelerate sales growth and enhance its product line.

Potential buyers would use NetApp to do the same on a larger scale. The Sunnyvale, California, company is the biggest player in the market for mid-range storage equipment, an area that is growing faster than high-end equipment, which EMC and IBM dominate.

"What better time to take advantage of a company like NetApp than in an economy like we have now? Perfect timing," said Joe Martins, managing director of Data Mobility Group, a research firm that follows the storage industry.

EMC, the No. 1 maker of data storage equipment, won the bidding for Data Domain on Wednesday with a $2.4 billion offer for the Santa Clara, California, company, whose sales are projected to soar 34 percent this year to $367 million, according to Reuters Estimates. [ID:nN08407594]

A spokeswoman for NetApp declined to comment on whether it is a target. Chief Executive Dan Warmenhoven said he would return to business as usual. "We remain highly confident in our already-compelling strategic plan, market opportunities and competitive strengths," he said in a statement on Wednesday.

Analysts are unconvinced.

"Missing out on purchasing these key strategic assets makes NetApp itself more likely to want to get sold," said Jefferies & Co analyst Bill Choi.

IBM SEEN AS POSSIBLE BUYER

Analysts almost unanimously point to IBM as NetApp's most likely suitor. The computing giant resells NetApp equipment that competes with an EMC storage line.

Such a purchase would prevent NetApp from partnering with other IBM competitors, said Brian Babineau, an industry analyst with Enterprise Strategy Group, a market-research firm.