NetApp's new CEO is Tom Georgens. Georgens steps in as Dan Warmenhoven, NetApp's CEO since 1994, moves on to the position of chairman of the board and a partnership development role under the direction of Georgens.
Warmenhoven's accomplishments were many, but he may be remembered most for turning the small niche-market opportunity that NAS once was as a dedicated file server attached to a LAN into the major networked storage platform NAS has become. Along the way, he built NetApp up to a 3.4 billion dollar company with 8,000-plus employees focused on storage.
Tom Georgens
(Credit: NetApp)NetApp co-founder Dave Hitz tells us that one of Warmenhoven's personal goals has been to retire at age 60. He's one year away from that milestone. Rather than continue to lead NetApp into a new phase that will be focused on scalable NAS, virtualization, and cloud computing, Warmenhoven has decided that Georgens' time has come.
Georgens' storage roots go back to the early to mid-1990s at EMC, where he was tapped to develop a midrange storage product to complement the Symmetrix line and exploit the growing Windows storage opportunity. That project was torpedoed internally, and Georgens went on to take on the storage business at LSI. EMC subsequently bought Data General, jettisoned DG's server business, but propelled Clariion to its current position of dominance in the midrange.
At LSI, Georgens surrounded himself with some very able executives who helped him establish the Engenio storage brand as the dominant OEM storage play, selling to the likes of IBM, STK, and Sun. He attempted to take Engenio public, but pulled back when both he and the executives at LSI decided that they couldn't get what they believed to be the true value of Engenio via an IPO. Not long thereafter, NetApp came calling. Georgens stepped in and later took on the position of COO, a move many analysts interpreted as one that placed him next in line for the CEO spot.
Now is a pivotal time in NetApp's history. NetApp has successfully transitioned from NAS-only to a broader range of storage and data management software products. And it is the only major independent and publicly held storage company left standing. STK was acquired by Sun. EMC has diversified to the point where it now calls itself an IT infrastructure player. That singular position in the eyes of some makes NetApp a takeover target. Here's why I think a takeover of NetApp is now less likely.
Georgens hates to lose. Selling-out now would be tantamount to losing.
How do I know? This may sound a bit odd but Georgens and I both participate in a not well-known activity called radiosport. Radiosport is practiced by ham radio operators worldwide. On certain weekends during the year, ham radio contestants try to make as many contacts with other hams in as many countries as they can during a 48-hour period. I do it because I've been a ham since my teen years and it's still fun to copy Morse code at something like 35 words per minute. Georgens probably enjoys this, too, but he's in radiosport to take all the marbles. Unlike me, Georgens is a world-class competitor. He has won numerous worldwide competitions, often from a station on the island of Barbados, and holds several North American records. In addition, he has represented the United States in the World Radiosport Team Championships.
So what, you say? Try to send and receive high-speed code for 48 hours with only occasional short breaks and maybe an hour of sleep in between. It takes dedication and an absolute desire to win to match Georgens' achievements.
Georgens didn't go to NetApp to sell the company. He went, I believe, because he wanted continue on NetApp's growth trajectory established years ago by Warmenhoven, Tom Mendoza, and Hitz. Selling would be letting someone else win. That's not in character for Georgens.
Much drama has ensued since NetApp announced the intended acquisition of Data Domain on May 20 for the whopping sum of $1.5 billion.
EMC countered with a $30-per-share offer valued at $1.8 billion. NetApp then raised its offer to $30 a share, valued at $1.9 billion. Data Domain essentially said, "Thank you, EMC, but we like the new NetApp offer more than yours." EMC then claimed that it had been unfairly shut out of the bidding process and appealed directly to Data Domain employees.
NetApp countered with a claim that EMC's potential acquisition of Data Domain would fail a federal regulatory review, a claim that EMC has rebutted as it considers shoveling more cash into the fire to make its proposal more attractive.
To its suitors, Data Domain is now reportedly worth $1.9 billion. To give you some perspective on that figure, Oracle recently agreed to acquire Sun Microsystems for $7.4 billion. A $1.9 billion acquisition would mean that Data Domain is now worth about 24 percent of that number, yet its 2008 revenues of $274 million are a tiny fraction of the $13 billion Sun took in sales revenue during 2008. Here's another relevant data point: EMC acquired VMware for a mere $635 million.
Deduplication is the storage world's new killer app. It's the great shrinking machine. Think of the old Steve Martin "let's get small" routine. It shrinks big data down to a small fraction of its original size--way more than is possible with the more common data compression routines. Why is that process now worth billions of dollars?
Most IT shops are moving away from using tape as their primary backup media in favor of disks. Deduping makes this migration economically viable by greatly reducing the backup data footprint on disk arrays by factor of 20 to 1, on average. You can't do that with tape. Nor can you get the input/output performance of disks from tape.
But that's not all that deduping does. It can be run against primary data storage streams to reduce the data footprint within expensive primary storage arrays. NetApp, among other vendors, supports this. Running it here may amount to the functional equivalent of buying another array, given the capacity that's saved as a result. When IT budgets are constrained, and storage is one of your top budget priorities, that's a big deal.
One can also dedupe archival storage, making the disk a repository for archival data that may need fast accessibility on a periodic basis--like when your corporate attorney needs to find exculpatory e-mails from three years ago and needs them yesterday.
So now everyone has to dedupe. Every major storage vendor, from EMC to Hewlett-Packard to IBM, now offers at least one dedupe option of the many that are now available, including the in-line and post-process variants. IBM, for example, offers four options.
In spite all its high-profile competition, Data Domain has been the acknowledged leader in integrating deduplication into the backup process. It offers disk-based deduplicated storage arrays for heterogeneous backup environments, and it leads all contenders in this space, in terms of market share, by a wide margin.
Does a leading position in a killer app justify a $1.9 billion valuation for a relatively unknown company mining a niche storage opportunity? Stay tuned. The executives at EMC and NetApp hate to lose, and EMC may yet win the heart of the fair maid named Data Domain.
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