Data Domain Comes Through

We highlighted Data Domain (DDUP) in a prior post a bit over a week ago as being exceptionally timely given the excellent data we were getting through our research sources and the market-driven pull-back in the stock to levels that provides some meaningful upside to our $24 IV estimate.

The stock has held up well during this time and into the earnings last night which reflected strong execution and allowed the company to raise guidance for the year.  The company continues to post powerful growth of over 100%.

We reminded our clients in a recent research report that data de-duplication is the top spending category in enterprise storage but the shares were too expensive at the time to get excited about.

Our IV model has been tweaked a bit post the quarter but doesn’t change our IV number much. We think that our $24 could go up by a couple of dollars but if the stock rallies post quarter we would probably take some profit.

Anywhere below $21 we’d probably get aggressive again assuming our research inputs remain intact.

Comments

[User 250499:]

Data deduplication is not a product category in storage. It is a required attribute of storage. DDUP sells a product that addresses back-up problems in a category called "virtual tape library or VTL". And they sell the product to middle market companies. Most storage industry people concur - DDUP is an interim solution to a minor inconvenience in IT. They must migrate from this market of be relevant in the future and they must solve the severe limitation they have on scalability in order to address major market customers. They do not compete with the likes of EMC today and have a long way to go to do so.

2008 Aug 25 11:21 AM