Data Domain Leaves Competitors Behind

We’ve been following Data Domain (DDUP) for over a year and it has tended to be too expensive to buy.  Our intrinsic value [IV] estimate has been fairly consistent at $24/share but recent inputs suggest the company may be able to do well enough for us to tweak our model higher and see an IV in the upper-$20's.

The recent market turmoil has reduced the price to just over $20, which makes this a strong candidate for boosting overall 2008 returns. The shares could easily finish the year up 20% from here.

Our inputs underscore the competitive lead that Data Domain enjoys in the marketplace. Major competitors like EMC (EMC) are still over a year behind. In addition, it has proven to be much more difficult to switch deduplication vendors than most people originally thought, enhancing lock-in.

We published an updated report entitled "Data Domain One Year Later ($)" with more information and to serve as a follow-up from our initial report published during their IPO in 2007. Subscribers received the report in June when DDUP was trading higher, meaning there wasn’t a strong stock call at the time.

However, at current prices, our clients should be more aggressive.

Comments

[kbg]

My company has begun using the product as the core to our global disaster recovery. As I saw how effective it would become, I decided to invest.

Coupled with about 90% virtualization from VMware at even the largest facilities with virtual DR images of the remaining, and Vizioncore vRanger to grab images, the de-deduplication lets us store a complete image locally, as well as us the dedup aware offsite replication to have one large DR facility that can service any of our sites for less than the cost of any individual site. The Data Domain product certainly has a cost but the functionality and capacity it delivers is remarkable.

The best thing about our DR solution is that the maintenance required on it is so low - we configure images to the initiating device, they land at the DR site, and if we decide we want DR up, we simply drop the images back onto servers and re-address them.

We're still finishing it up but we see this as a way to do DR inexpensively without difficult to execute complexity and a huge ongoing investment in keeping the process documented and current.