Since we published our short IPO report covering Data Domain on June12, we received more in-depth information from our friends over at TheInfoPro. Their proprietary report clearly shows strong momentum for Data Domain in the enterprise market. Although EMC will take a bite out of this market, Data Domain has a very strong position.
In addition, many were reminded of the still developmental state of the backup and recovery market with the full day database-related outage over at FeedBlitz. Data management remains a complicated and still unsolved problem for most companies.
Taking all factors into account we would say the company has even better chances of executing well and achieving our fair value estimate of $23/share. Data Domain would also make a very good acquisition for a number of large industry players. The mid-point of the current range is $12.50.
Original Report Summary: Data Domain (DDUP) is showing explosive growth thanks to its ability to leverage indirect distribution channels to exploit demand for more efficient global backup solutions. We viewed the prospectus with some skepticism and have identified some real reservations. However, our long-term valuation model suggests a fair value for the shares of $23. We can’t say for sure whether or not Data Domain will be able to execute on its plan, but for now it is the company’s to lose. Even if it ends up staying in the (SMB) market its plan can work and provide very good growth with sustainable operating margins just over 20%. The offering price discounts complete success into 2008.
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Tags: Data Domain, EMC, DDUP, IPO Research, Data
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