The collapse of merger talks between Sun Microsystems (NASDAQ: JAVA) and IBM (NYSE: IBM) have some wondering if NetApp (NASDAQ: NTAP) could turn out to be a beneficiary.
NetApp shares jumped 11 percent earlier this week on no news, and the speculation among traders is that NetApp could now become an acquisition target, rumors that first emerged earlier this year.
If nothing else, the IBM-Sun deal's collapse has removed some uncertainty around NetApp's NAS partnership with IBM, but analysts don't expect the company to be acquired anytime soon.
"Nobody is going to buy NetApp," said Wedbush Morgan analyst Kaushik Roy, who noted that the company's $5.6 billion market cap would make an acquisition pricey.
IBM won't buy NetApp because it needs its R&D budget for high-end storage and FICON connectivity, he said, and Big Blue is also pushing its own XIV offerings that are "likely to cannibalize some of NetApp."
Cisco (NASDAQ: CSCO) isn't likely to buy NetApp because it's already ruffled enough feathers with its move into the server business and its relationship with EMC (NYSE: EMC) and its VMware (NYSE: VMW) subsidiary has grown in importance as a result.
"How many wars can Cisco fight at the same time?" asked Roy. "Cisco's only friends are now EMC and NetApp. Cisco is not going to start a war with EMC by buying NetApp at this time."
And HP (NYSE: HPQ) OEMs its high-end storage from Hitachi, while its own MSA and EVA lines are doing well in the low end and midrange.
Enterprise Strategy Group analyst Brian Babineau agrees that NetApp's price tag is a little off-putting, and he also doesn't see NetApp becoming an acquisition target.
"It is pretty evident that Cisco is more focused on the server business and is lining up EMC and NetApp as very close alliance partners," said Babineau. "It does not appear that they want to be in the storage business. IBM has already spent a nice chunk of change on storage solutions, and they already have access to the NetApp solution via an OEM agreement, which begs the question, why buy the cow when you are already getting the milk for free?
"I am also not convinced that NetApp is willing to sell out right now," he added. "They have built a great company with a high-quality, reputable product portfolio. Yes, the company has its challenges and needs to create more momentum through innovation and potentially acquisition, but it has very loyal customers and a strong management team which has helped transform the company in prior economic setbacks."
One data storage company that appears to be benefiting from the turmoil in the server market is storage and Ethernet switch maker Brocade (NASDAQ: BRCD), which saw its shares jump 12 percent on Wednesday.
With IBM and HP unhappy about Cisco's move into the server business, both appear to be giving more business to Brocade, said Roy. But he doesn't see Brocade becoming a takeover target for either company because most of its business is through OEMs.
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