June 1 (Bloomberg) -- EMC Corp. made an unsolicited offer to acquire Data Domain Inc. for $1.8 billion in cash, topping a bid by NetApp Inc., which agreed to buy the company for $1.5 billion two weeks ago.

DataDomain rose 16 percent in late trading after EMC offered $30 a share in cash. NetApp’s offer is valued at $25.56 a share, based on today’s closing price, making EMC’s bid 17 percent higher.

EMC, the biggest maker of storage computers, said it wants Data Domain to expand in the market for systems that reduce the amount of disk space needed to store data. While EMC said it can finance the deal with cash, NetApp would have to use more stock to match the offer, said Jayson Noland, an analyst at Robert W. Baird & Co. in San Francisco.

“I think this will be the final outcome,” Noland said. “We didn’t expect somebody to try to outbid NetApp.”

EMC Chief Executive Officer Joe Tucci made the proposal in a letter today to Data Domain CEO Frank Slootman.

The acquisition will add to EMC’s earnings next year and won’t change profit in the current year, excluding some costs, Tucci said on a conference call. He said in his letter that EMC was interested in buying Data Domain prior to the NetApp agreement.

‘Disappointed’

“We are disappointed that we were not given an opportunity to explore a business combination prior to the announcement of your proposed transaction with NetApp, particularly since I believe you should have been aware of our interest,” Tucci wrote.

Edward Luboja, a spokesman for Santa Clara, California- based Data Domain, declined to comment. Lindsey Smith, a spokeswoman for NetApp, also declined to comment.

Data Domain rose $4.25, or 16 percent, to $30.60 in extended trading after closing at $26.35 on the Nasdaq Stock Market. EMC, based in Hopkinton, Massachusetts, added 67 cents to $12.42 at 4 p.m. on the New York Stock Exchange.

Data Domain, whose customers include AT&T Inc. and the U.S. Defense Department, sells products that eliminate the need to store multiple copies of the same document, cutting costs. Its revenue more than doubled last year to $274 million. Net income was $21.6 million in 2008, compared with a loss of $3.7 million a year earlier.

Deal Value

EMC’s offer is net of Data Domain’s cash. Data Domain had about $250 million in cash and short-term investments at the end of March, meaning that the value of the deal for shareholders would be more than $2 billion.

If Data Domain accepts EMC’s offer, it will have to give NetApp five days to match it, EMC said. The agreement between Data Domain and NetApp has a $57 million breakup fee.

Under the NetApp plan, Data Domain investors would get $11.45 in cash and an amount of NetApp stock that varies based on the buyer’s share price. When NetApp’s share price is more than $19.88, as it was at the close of trading today, the exchange ratio is 0.682, valuing the NetApp takeover at $25.56 a share.

EMC’s bid “validates the uniqueness of Data Domain’s platform,” said Brent Bracelin, an analyst at Pacific Crest Securities Inc. in Portland, Oregon.

EMC is the biggest company in storage hardware and software, with 19 percent market share, compared with NetApp’s 7 percent, Bracelin said. Data Domain has less than 2 percent share, he said.

Tucci said EMC would maintain Data Domain’s leadership team and operate it as a unit of EMC. He said EMC is ready to execute the agreement as soon as the Data Domain board agrees.

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Zachary R. Mider in New York at zmider1@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net

Last Updated: June 1, 2009 18:36 EDT